Based on the Information Provided, Calculate the Intrinsic Value in 2004

question 67

Multiple Choice

Based on the information provided, calculate the intrinsic value in 2004 of a share of INV Corp. using the FCFF (free cash flow to the firm) model. For 2009 the FCFF was $30,000, total debt was $20,000, and there were 12000 shares outstanding. The required rate of return is 9% and the estimated growth rate in FCFF is 6.5%.

• A) $104.83
• B) $153.25
• C) $112.50
• D) $94.92
• E) $80.45

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Definitions:

Risk

The exposure to potential financial loss or gain, often measured by the variability of returns.

Limited Liability Protection

A legal structure that shields a company's owners from being personally responsible for the company's debts or liabilities.

Corporate Form

A legal business structure recognized in many jurisdictions allowing the company to operate as a separate legal entity apart from its owners, providing limited liability and ease of ownership transfer.

Entrepreneurs

Individuals who create, launch, and manage new businesses, taking on most of the risks and reaping most of the rewards of the venture.