# Question

Now assume that Gemco Jewelers has $10 million in cash and nonoperating assets and that the firm has $15 million in outstanding debt.

a. Estimate the value of equity in the firm.

b. If the firm has 5 million shares outstanding, estimate the value of equity per share.

c. How would your answer to b change if you learn that the firm has 1 million options outstanding, with an exercise price of $5 and five years to maturity? (The estimated value per option is $7.)

a. Estimate the value of equity in the firm.

b. If the firm has 5 million shares outstanding, estimate the value of equity per share.

c. How would your answer to b change if you learn that the firm has 1 million options outstanding, with an exercise price of $5 and five years to maturity? (The estimated value per option is $7.)

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