Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2019 are as follows: ($ millions) Net income Investment Free cash flow 2020 1.0 1.0 0 2021 2022 2.5 4.2 1.5 1.7 1.0 2.5 2023 2024 4.70 5.0 1.9 1.9 2.8 3.1 Phoenix's recovery will be complete by 2024, and there will be no further growth in net income or free cash flow. a) Calculate the PV of free cash flow, assuming a cost of equity of 10%. b) Assume that Phoenix has 12 million shares outstanding. What is the price per share?

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Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.