Market capitalization is the total amount of market value of equity of a company. It is obtained by multiplying the total number of shares outstanding with the current market value of the stock. It is one of many important factors taken by investors and analysts to assess the company profile before investment. The size of a company is defined by its market capitalization and also its position in the related industry that can affect the investors’ decision of investment.
Also, market capitalization is used by the acquiring companies to estimate the takeover price of a target company. Assume IBM is willing to take over Samsung and wants to estimate the amount of bid for taking over. The current market price of Samsung share is $50 per share and it has 2,000,000 shares outstanding. The market capitalization of Samsung will be $100,000,000.
Happy Times, Inc., wants to expand its party stores into
ECB Co. has 1 million shares outstanding selling at $20
Company X is expected to pay an end-of-year
Consider three investors: a. Mr. Single invests for
EJH Company has a market capitalization of $1 billion and 20
Company Y does not plow back any earnings and is expected to
Rubenstein Bros. Clothing is expecting to pay an annual dividend per
If company Z (see Problem 5) were to distribute all
Company Z’s earnings and dividends per share are expected to grow indefinitely
In January 2009, American Airlines (AMR) had a market
