Hallowell Inc. has free cash flow of $2.5 million and 1.25 million shares outstanding. If you believe the price to cash flow ratio for this company should be 11, what is the highest price you should pay for the stock?

The highest price I should pay for the stock is $22.

Explanation:

The cash flow is the net cash flow produced from the operations of the company after paying all the operational and capital expenditures. It is the cash which can be distributed between any security-holders and stockholders.

According to given data

Free cash flow = 2.5 million

Outstanding shares = 1.25 million

Cash flow for each share = Free cash flow / outstanding shares = 2.5 million / 1.25 million = $2 per share

Price to cash flows ratio = price of share / cash flow per share

11 = Price of share / $2 per share

Price of share  = 11 x $2 = $22

hi : ) i found this so i hope this !

"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"