The Peterson Company has FCFF of $1000.FCFF is expected to grow by 12% next year.The cost of capital is 12% and the level of debt is $5000.The number of shares outstanding is 500.Calculate the firm's share price.
A) $44
B) $55
C) $34.19
D) $47.23
E) $50

Question

Quizplus · Accepted Answer

The firm's share price is calculated using the formula: Share Price = (FCFF * (1 + growth rate) / (cost of capital - growth rate) - debt) / number of shares. Substituting the given values: Share Price = ($1000 * 1.12 / (0.12 - 0.12) - $5000) / 500 = $44.

The Peterson Company Has FCFF of $1000