Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Share value
- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.
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- December 12, 2021 at 2:27 pm #644073
Hello John,
In my exam I got a question where share price needed to be calculated using FCF, both types of flows, FCFE& FCFF, were given but no information was given to calculate cost of equity, only cost of capital was given. So the value I got by discounting FCFF would be the value of whole firm including debt, right? This was around 15m, but when I subtracted debt of 60m the equity value went negative which isn’t possible, right? In such case what will be the value of a company’s share, zero??December 13, 2021 at 7:56 am #644125Although from what you have written it sounds as though your approach was correct. However I do not think that the examiner would have a question whether the debt was more than the value of the firm.
However I cannot really comment more until the ACCA has published the question and answers (if they ever do, given that they only publish some of the questions on a six-monthly basis).
January 23, 2022 at 5:15 pm #647337Thankyou for your assistance John. The question didn’t got published.
January 24, 2022 at 6:41 am #647357You are welcome.
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