You are looking at the valuation of a stable firm, Networks Ltd, done by an investment analyst.

Based on an expected free cash flow of PKR 72million for the following year and an expected

growth rate of 7.5 percent, the analyst has estimated the value of the firm to be Rs. 1,550

million. However, he committed a mistake of using the book values of debt and equity. You do

not know the book value weights employed by him but you know that the firm has a cost of

equity of 16.5 percent and a pre-tax cost of debt of 15 percent. The market value of equity is

2.75 times of its book value where as the market value of its debt is 72% of its book value, the

company has paid-up capital of Rs. 130 million with par value of Rs.10/share. The company

pays tax on profit at the rate of 30 percent.

Required:

What is the correct value of the firm per share?