The Peterson Company has an FCFF of $1000. The FCFF is expected to grow by 12 percent next year. The cost of capital is 12 percent, and the level of debt is $5000. The number of shares outstanding is 500. Calculate the firm's share price.

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. Plugging in the values: ($1000 * 1.12 / (0.12 - 0.12) - $5000) / 500 = $44.

The Peterson Company Has an FCFF of $1000