3. (3 points) Your boss asks you to determine the fair market value of a firm. The firm is unlevered and does not plan to take on leverage. The firm does not have any excess cash and will generate only one unlevered free cash flow in exactly one year from today. The following information is available about this unlevered free cash flow (FCF): in the best-case scenario, the FCF will be $44 million. In the worst-case scenario the FCF will be $11 million. On average, the FCF will be $22 million. With 50% probability the FCF will be less than or equal to $27.5 million, and with 50% probability the FCF will be larger than $27.5 million. The firm has no other projects and no excess cash. The unlevered cost of equity for the firm is 10%. The best answer you can give in response to your boss request is:

a. 40 million b. 25 million c. 20 million d. 10 million e. There is not enough information to determine the fair firm value, since the information provided does not tell us what the actual FCF will be. f. None of the above.