Homework Answers
Solution:
Calculation of Free cash flow
| Amount($) | |
| EBIT | $29,000,000 |
| Less:Tax @21% | $6090,000 |
| Less:Increased in working capital | $4000,000 |
| Less:Investment in fixed assets | $10,000,000 |
| Free Cash flow | $8910,000 |
Value of the firm=Free cash flow(1+growth rate)/WACC-Growth rate
=$8910,000(1+0.04)/(0.14-0.04)
=$92,664,000
Value of equity=Value of firm-Value of debt
=$92,664,000-$57000,000
=$35,664,000
Intrinsic value=Value of equity/No. of shares
=$35,664,000/100,000,000
=$0.35
Thus correct answer is Option D
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