FCFE1 18B. FCFF Suppose FCFE = $1.0 million in year 1. The growth rate for Years 2 and 3 is 25%. Year 4 is 10%. The growth rate is expected to normalize to 3% afterwards. If the required rate of return is 12.5%. What is the value of this stock if there are 500,000 outstanding shares? 3 4 5 $1.0000 g Yr 2-3 years 25.00% g Yr 4 year 10.00% g Year 5+ 3.00% k 12.50% PVFCFE # of shares 500,000 Stock Price Kohelin - 1.0

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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FCFE1
18B.
FCFF
Suppose FCFE = $1.0 million in year 1. The growth rate for Years 2 and 3 is 25%. Year 4 is 10%.
The growth rate is expected to normalize to 3% afterwards. If the required rate of return is 12.5%.
What is the value of this stock if there are 500,000 outstanding shares?
3
4
5
$1.0000
g Yr 2-3 years
25.00%
g Yr 4 year
10.00%
g Year 5+
3.00%
k
12.50%
PVFCFE
# of shares
500,000
Stock Price
Kohelin
- 1.0
Transcribed Image Text:FCFE1 18B. FCFF Suppose FCFE = $1.0 million in year 1. The growth rate for Years 2 and 3 is 25%. Year 4 is 10%. The growth rate is expected to normalize to 3% afterwards. If the required rate of return is 12.5%. What is the value of this stock if there are 500,000 outstanding shares? 3 4 5 $1.0000 g Yr 2-3 years 25.00% g Yr 4 year 10.00% g Year 5+ 3.00% k 12.50% PVFCFE # of shares 500,000 Stock Price Kohelin - 1.0
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