Highpoint had a FCFE of $246M last year and has 123M shares outstanding. Highpoint's required return on equity is 10%, and WACC is 9%. If FCFE is expected to grow at 8.0% forever, the intrinsic value of Highpoint's shares is

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Quizplus · Accepted Answer

The intrinsic value of the shares can be calculated using the Gordon Growth Model: P = FCFE * (1 + g) / (r - g). Here, FCFE = $246M, g = 8%, r = 10%. So, P = $246M * 1.08 / (0.10 - 0.08) = $13,284M. Dividing by 123M shares gives $108 per share.

Highpoint Had a FCFE of $246M Last Year and Has