1. True or False: One of the advantages of the market multiple valuation approach is that this approach helps to identify the important value drivers.

2. True or False: A firm has a cost of equity of 13 percent and an after-tax cost of debt of 6 percent. Given this, increasing the firms beta will increase the firm's weighted average cost of capital, other things held constant.

Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporary heavy workloads. Your employer is also considering the purchase of Biggerstaff & McDonald (B&M), a privately held company owned by two friends, each with 5 million shares of stock. B&M currently has free cash flow of $24 million, which is expected to grow at a constant rate of 5%. B&Ms financial statements report short-term investments of $100 million, debt of $200 million, and preferred stock of $50 million. B&Ms weighted average cost of capital (WACC) is 11%. What is B&M's estimated intrinsic stock price per share? (Hint: Estimated Equity value = Constant growth Terminal Value + Short-term investments - debt - preferred stock)