1) Free cash flow to equity (FCFE) should be discounted using _______, while Free cash flow to the firm (FCFF) should be discounted using _____.

a. None of the other answers is correct

b. cost of equity capital; WACC

c. cost of equity capital; cost of equity capital

d. WACC; WACC

e. cost of equity capital; cost of debt

2) HNV Inc. had FCFE of $2 (FCFE0) on $4 (E0) of earnings last year. FCFE and earnings are expected to grow at 20% (g1) over the next 2 years. After 2 years, the growth rate is expected to slow to 2% (g2). Using an appropriate discount rate of 10% and a 2-stage FCFE, what is the intrinsic value of its stock?

a.$96.00

b.-$61.09

c.$34.91

d.$30.35

e.$36.72

3) Using the DDM, you calculate that a stock has an intrinsic value of $155 and an actual stock price of $190 (assume estimate is precise, so do not need the 20% rule). If your DDM calculations are right, this stock is likely ________.

a. has a beta <1

b. is overvalued

c. None of the other answers is correct

d. has a beta > 1

e. is undervalued