Business, 14.04.2020 21:27 coursonianp8izbc

From year 2013 onward growth in FCFE is expected to remain constant at 5% per year. The industry has a beta of 0.90 and the current industry price is $105. Currently the yield on 10-year Treasury notes is 5% and the equity risk premium is 4%.

5. Calculate the required rate of return on equity. (Hint: derived from CAPM)
6. Calculate the present value now (Year 2004) of FCFE during the period of increasing growth (that is for years 2005 to 2008).
7. Calculate the present value now (Year 2004) of FCFE during the period of constant growth (that is for years 2013 onwards).
8. Calculate the intrinsic value of the industry now (Year 2004).

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From year 2013 onward growth in FCFE is expected to remain constant at 5% per year. The industry has...

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