Question: DCF with Terminal P / E There are many ways to value an asset. Valuation is a science, but it is also an art. Each

DCF with Terminal P/E
There are many ways to value an asset. Valuation is a science, but it is also an art. Each method may not provide identical answers, and they can sometimes be far off.
A DCF model that incorporates using multiples and free cash flow is shown on slides 38-42 for Tesla. Using a similar approach to slides 38-40, value a stock with the following information.
Assume
FCFE per share in time 0= $1.00
FCFE per share in time 1= $1.10
FCFE per share in time 2= $1.20
FCFE per share in time 3= $1.30
FCFE per share in time 4= $1.40
FCFE per share in time 5= $1.50
FCFE per share in time 6= $1.60
FCFE per share in time 7= $1.70
Assume change in capital (net fixed assets and net operating working capital) in time 7 are $0.50 per share.
Assume the P/E in time 7 is 18
Assume the cost of equity (the discount rate or r) is 10%.
What is this stock worth?

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