Homework Answers
FCFE for next 3 years = $ 1MM
Thereafter the growth rate = 5%
Unleveraged Capitalization rate or Cost of Equity = 12%
Calculating the Present Value of FCFE:
PV = 0.8929 MM + 0.7972 MM + 0.7118 MM + 10.6767 MM
PV = $ 13.0786 MM
Intrinsic value of per Equity = PV of FCFE/no of shares outstanding
= $ 13.0786 MM/0.6 MM
= $ 21.80
So, Intrinsic value of per Equity is $ 21.80
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