Reynolds Construction\'s value of operations is $750 million based on the free c

Question

Reynolds Construction's value of operations is $750 million based on the free cash flow valuation model. Its balance sheet shows $50 million of short-term investments that are unrelated to operations, $100 million of accounts payable, $100 million of notes payable, $200 million of long-term debt, $40 million of common stock (par plus paid-in-capital), and $160 million of retained earnings. What is the best estimate for the firm's value of equity, in millions?

a.

$500

b.

$429

c.

$700

d.

$525

e.

$300

a.

$500

b.

$429

c.

$700

d.

$525

e.

$300

Explanation / Answer

firm value of equity =free cash flow value - debt - notes payable + invsetments = 750 -200-100+50= 500 mn

a is right.

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