Question

28. Your DCF model yields a firm value of $5b. Debt equals $1.5b. Assuming a 100...

28. Your DCF model yields a firm value of $5b. Debt equals $1.5b. Assuming a 100 million shares outstanding, the value per share is

A. $6.5 B. $3.5 C. $350 D. $35

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Answer #1

The correct answer is D. $35

Firm Value = Total Equity + Total Debt

Value per share = Total equity / Number of shares outstanding

Step 1 - Calculation of Total equity

Firm Value = Total Equity + Total Debt

$5b = Total Equity + $1.5b

Total Equity = $5b - 1.5b

= $3.5b

Step 2 - Value per share

Value per share = Total equity / Number of shares outstanding

= $3.5b / 100m

Converting $3.5b into million

= 3.5 * 1000

= $3500m

Therefore value per share

= $3500 m / 100m

= $35

The value per share is $35

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