Seaman had a FCFE of $4.6B last year and has 113.2M shares outstanding.Seaman's required return on equity is 11.6% and WACC is 10.4%.If FCFE is expected to grow at 5% forever,the intrinsic value of Seaman's shares are ____________.
A)$646.48
B)$64.66
C)$6,464.8
D)$6.46
E)none of the above

Question

Quizplus · Accepted Answer

The intrinsic value of Seaman's shares can be calculated using the Gordon Growth Model:Intrinsic Value = FCFE / (r - g)where:FCFE = Free Cash Flow to Equity = $4.6Br = Required return on equity = 11.6%g = Growth rate of FCFE = 5%Plugging in the values, we get:Intrinsic Value = $4.6B / (0.116 - 0.05) = $64.66Therefore, the intrinsic value of Seaman's shares is $64.66.

Seaman Had a FCFE of $4