Based on the Free Cash Flow Valuation Model, the Value

question 53

Multiple Choice

Based on the free cash flow valuation model, the value of Weidner Co.'s operations is $1,200 million.The company's balance sheet shows $80 million in accounts receivable, $60 million in inventory, and $100 million in short-term investments that are unrelated to operations.The balance sheet also shows $90 million in accounts payable, $120 million in notes payable, $300 million in long-term debt, $50 million in preferred stock, $180 million in retained earnings, and $800 million in total common equity.If Weidner has 30 million shares of stock outstanding, what is the best estimate of the stock's price per share?

• A) $24.90
• B) $27.67
• C) $30.43
• D) $33.48
• E) $36.82

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Definitions:

Marginal Revenue Product

The additional revenue generated from utilizing one more unit of an input, like labor or capital.

Substitution Effect

The shift in consumer behavior toward different products as a result of changes in their relative costs, prompting the replacement of one item with another.

Output Effect

The impact on the economy when production increases, leading to a higher real GDP and potentially affecting employment and price levels.

Total Revenue Product

Total Revenue Product is the total revenue generated by a firm from selling its output, which is a key concept in understanding a firm's profitability.