Home Depot\'s common stock closed fiscal 2012 at a price f $76.30 per share. The

Question

Home Depot's common stock closed fiscal 2012 at a price f $76.30 per share. There were 1,772 million shares outstanding. At the end of 2012. The book value of Home depot's equity was $17,786 million. Suppose the broad stock market falls 10% in a year and Home Deppot's stock price falls by 10%.

a. will the company's maket value added rise or fall?

b. Should this change affect our assessment of the performance of Home Depot's managers?

c. Calculate the market value added. If th estock market were unchanged and Home Depots stock fell by 10%. (Enter yoour answer in millions. Round intermediate calculatons and final answer to the nearest whole number)

market vakue added _______________million

Explanation / Answer

Answer a.

Market Value = 1772 million * $76.30

Market Value = $135,203.60 million

Market Value Added = Market Value – Book Value

Market Value Added = 135,203.60 – 17,786 million

Market Value Added = 117,417.60 million

Answer b.

Yes

Answer c.

Market Value = $135,203.60 million * (1-0.10)

Market Value = $121,683.24 million

Market Value Added = Market Value – Book Value

Market Value Added =$ 121,683.24 – 17,786 million

Market Value Added = $103,897.24 million

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