The growth in per share FCFE of FOX, Inc.is expected to be 15% per year for the next three years, followed by a growth rate of 8% per year for two years; after this five-year period, the growth in per share FCFE is expected to be 3% per year, indefinitely.The required rate of return on FOX, Inc.is 13%.Last year's per share FCFE was $1.85.What should the stock sell for today
A)$28.99
B)$24.47
C)$26.84
D)$27.74
E)$19.18

Question

Quizplus · Accepted Answer

Calculations are shown below.P₅ = 3.28 (1.03)/(.13 - .03) = $33.80; PV of P₅ = $33.80/(1.13)⁵ = $18.35; P₀ = $18.35 + $9.39 = $27.74.

The Growth in Per Share FCFE of FOX, Inc