Question

Please answer the problem below and show the work

For the year just concluded, Free Cash Flow to Equity (FCFE) is 100 million. FCFE grows at 10% annually for the next three years, and then is constant (grows at 0%) per year thereafter. The required rate of return on equity is 8% and the weighted average cost of capital is 7.5%. There are 40 million outstanding shares. What is the value per share? (Enter your answer to the nearest $0.01. Leave the $ sign off. In other words, if your answer is $55.55, enter 55.55 for your answer.)

Answer 1

Year	Particulars	Cash flow	× discount 8%	Present value
1	FCF	110.00	0.92593	$        101.85
2	FCF	121.00	0.85734	$        103.74
3	FCF	133.10	0.79383	$        105.66
3	Share price	1,663.75	0.79383	$     1,320.74
Equity value				$     1,631.99
/ Shares outstanding				40
Stock price				$          40.80

Stock price is $40.80