Boaters World is expected to have per share FCFE in year 1 of $1.65, per share FCFE in year 2 of $1.97, and per share FCFE in year 3 of $2.54.After year 3, per share FCFE is expected to grow at the rate of 8% per year.An appropriate required return for the stock is 11%.The stock should be worth _______ today.
A)$77.53
B)$40.67
C)$82.16
D)$71.80
E)None of the options

Question

Quizplus · Accepted Answer

Calculations are shown in the table below.P₃ = $2.54 (1.08)/(.11 - .08) = $91.44; PV of P₃ = $91.44/(1.11)³ = $66.8601; P₀ = $4.94 + $66.86 = $71.80.

Boaters World Is Expected to Have Per Share FCFE in Year