If a company is currently generating a free cash flow of $10 per share,which is expected to continue indefinitely,and if the discount rate is 10%,the estimated share price would be $100.

Question

Quizplus · Accepted Answer

The estimated share price can be calculated using the formula: Share price = Free cash flow / Discount rate. Plugging in the values given: Share price = $10 / 0.1 = $100. Therefore, the statement is true.

If a Company Is Currently Generating a Free Cash Flow