Question: 1. You have been asked to review the terminal value calculation in a valuation done by another analyst.The analyst has the following estimates for net

1.You have been asked to review the terminal value calculation in a valuation done by another analyst.The analyst has the following estimates for net income and FCFE for the next 3 years:

1 2 3

Net income 220 286 371,8

FCFE 88 114,4 148,72

To estimate the terminal value, the analyst has taken the FCFE in year 3 and grown it by 12% (the stable growth rate) and used a cost of equity of 18%, without considering the changing reinvestment needs. If the firm's return on equity will remain unchanged at current levels in perpetuity and the analyst's estimates of the FCFE for the high growth period are correct, estimate the correct terminal value of equity, using the perpetual growth rate of 12% and the cost of equity of 18%.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

9. You have been asked to review the terminal value calculation in a valuation done by another analyst. The analyst has the following estimates for net income and FCFE for the next 3 years: Year 1...

You have been asked to review the terminal value calculation in a valuation done by another analyst. The analyst has the following estimates for net income and FCFE for the next 3 years: Year 1 Year...

need answer for these questions 13, 17, 19, 20, and 23? PART 5 Business Valuations Chapter Business Valuations A valuation analyst should be able to explain and defend his or her valuation, including...

need answers for questions 13, 17, 19, 20, and 23? PART 5 Business Valuations Chapter Business Valuations A valuation analyst should be able to explain and defend his or her valuation, including both...

I need help with writhing a financial statement analysis report about Company Sprint Airline. I have attached the documents including the overview of the project and the template of it and example of...

For this assignment, you will read the Electrolux and GE Appliances case study, which offers an analysis of the Electrolux?s valuation process during its acquisition of GE Appliances in August of...

Please see the snap photo below for further instructions. thank you 1. Read the Electrolux and GE Applianceh 2. \"the Excel spreadsheet template prov1 e posted N 3 Answer the following questions....

Please see the snap photo below for further instructions 1. Read the Electrolux and GE Appliance". 3. Answer the following questions. ___-____-- \L _ ' Case Questions You are leading the valuation...

**Please see the snap photo below for further instructions. thank you and be safe** 1. Read the Electrolux and GE Appliance". 3. Answer the following questions. ___-____-- \L _ ' Case Questions You...

When a plot is made of x-ray intensity versus wavelength for a particular x-ray tube, two sharp peaks are superimposed on the continuous x-ray spectrum. These sharp peaks are called "characteristic"...

Write equations for all of the steps (initiation, propagation, and termination) in the free-radical chlorination of methane to form methyl chloride.

Elizabeth Shoe Co . has 5 0 0 pairs of unsold shoes on hand. These shoes are of a unique design that was very popular last year. Last year, Elizabeth Shoe was able to buy the shoes for $ 2 0 and sell...

The force constant of a massless spring is 2 5 . 0 N / m . A mass of 0 . 4 5 kg is oscillating in simple harmonic motion at the end of the spring

The second most named woman was Sarah Palin, who was named by 15% of the people in the sample. Use a technology tool to find a 95% confidence interval for the population propor- tion that would have...

In 2009, the most named man was Barack Obama at 30%. Use a technology tool to find a 95% confidence interval for the population proportion that would have chosen Barack Obama.

5. Use the sample to construct a 95% confidence interval for the population mean training time of all runners. How do your results differ from those in Exercise 3? Explain.