the present value of all the expected future free cash flow

the present value of all the expected future free cash flow of your firm is $320 million. the firm has $170 million of debt, and a cash balance of $30 million. If there are 13 million shares outstanding, what is the price of each share of this firm? a) $40.00 b) $9.85 c) $9.25 e) $13.85

Solution

So we know that the value of the firm = Pv of future cash flows + Current cash - Debt outstanding

Value of Firm = ($320 + $30 - $170) Millions

Value of Firm = $ 180 Millions

So to calculate the price of each share we have the following equation,

Price = Market Value of firm / No of shares outstanding

Price = $180 Millions / $ 13 Millions

Price = $13.85

Hence the answer for this question will be E) $13.85.

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