Series 79 stock price per share

Question

1. UFA Co has entered an agreement with an investment banker to find a strategic buyer. You have gathered the following information on UFA Co. 

UFA Co.
Earnings per share ($)	2.45
Cash flow per share ($)	4.15
Book value per share ($)	12.60
Sales per share ($)	18.85

Bankers LTD estimates a potential purchase price of UFA Co. using comparable analysis of recent transactions. Bankers LTD thinks the metric that captures the greatest value is pricing the deal on a price to cash flow of 9.6. Based on this, what stock price per share is closest to where Banker LTD should try to find a buyer for UFA Co.?  

A. 32

B. 39

C. 43

D. 47

 

Answer 1

The formula that you would use in this case is Stock Price per Share=Cash Flow per Share*Price-to-Cash-Flow Ratio

Cash flow per share is given to us as 4.15 and price to cash flow is 9.6. 4.15*9.6=39.84. 40 is not a choice, so 39 is the closest answer.