Which of the following is the appropriate way to calculate the price of a share of a given company using the free cash flow valuation model? A) P₀ = Div₁/(r_E - g) B) P₀ = PV(Future Free Cash Flow of Firm) / (Shares Outstanding₀) C) P₀ = [Div₁/ (r_E - g)] / (Shares Outstanding₀) D) P₀ = (V₀ + Cash₀ - Debt₀) / (Shares Outstanding₀)

Question

Quizplus · Accepted Answer

The free cash flow valuation model calculates the price of a share by taking the firm's enterprise value (V₀), adding cash, subtracting debt, and dividing by the number of shares outstanding.

Which of the Following Is the Appropriate Way to Calculate