You have the following information for an up and coming utility company (FirstPower) striving to revolutionize the electric grid:

FirstPower (FP) owns 72% of EasyPower. EasyPower trades on NYSE with 52 million shares outstanding at $8.35 per share. FP has a cash balance of 400 million but you believe that you should attach a premium of 7% given its track record. FP has 135 million in accounts payable and 270 million in debt that is marked to market. FP has been targeted with a lawsuit. If FP were to lose the suit, payout will be 220 million but with the help of lawyers you estimate the probability of this happening is 35%. FP has 87 million shares outstanding in addition to 7 million management options. The management options have an average exercise price of $7 and average expiration of 4 years. The value per option is $6. You have completed the estimate of the operating value of assets of FP at $1.3 billion. Estimate the value of common equity per share of FP.

Now you evaluate Zale Inc. The company is expected to earn $77 million in after-tax operating income next year on $1.1 billion capital invested. The company is in stable growth phase and is expected to sustain its current ROC while growing at 1.8% a year forever. You estimate the COC at 9%

b) Estimate the value of the operating assets of Zale

You have noticed that Zale has a cash balance of $120 million invested in commercial paper (CP) and T-Bills (T-B) earning 0.6% a year. You estimate that there is a 60% probability that the management of Zale will reinvest this cash in assets that are similar to their exiting operating assets' risk return profile. There is a 40% likelihood that the cash will be continued to be invested in CPs and T-Bs.

c) What value would you attach to the cash balance of Zale