Final answer:
To estimate the fair market value of Snap stock using the Discounted Cash Flow method, calculate the Present Discounted Value of expected future profits using a 15% discount rate, sum these values, and then divide by the number of shares.
Step-by-step explanation:
The question is asking how to determine the fair market value of Snap stock per share using the Discounted Cash Flow (DCF) method. To do this, we first calculate the Present Discounted Value (PDV) of the expected future profits using a discount rate, which in this case is 15%. The PDV calculation is done for each expected profit timing, and then all PDVs are summed to obtain the total PDV.
After calculating the total profits' PDV, the next step is to divide this total by the number of shares to find the value per share. For instance, if the PDV of total profits is $51.3 million and there are 200 shares, we divide $51.3 million by 200 to get $0.2565 million, which is approximately $256,500 per share.