1) XTE Co. paid a dividend of $2 (D0) last year. Dividends are expected to grow by 10% for two years (g1), then slow to 5% thereafter (g2). The discount rate is 8%. What will the value of this stock be two years from now (V2)?

a.

$76.73

b.

$55.00

c.

$84.70

d.

$72.62

e.

$21.73

2) Free cash flow to equity (FCFE) is defined as _______.

a.

net income - (capital expenditures - non cash charges) - increases in non-cash working capital + net debt issuance

b.

net income + (interest expense)*(1-t) - (capital expenditures - non cash charges) - increases in non-cash working capital

c.

(earnings before interest and taxes)*(1-t) - (capital expenditures - non cash charges) - increases in non-cash working capital

d.

None of the other answers is correct

e.

net income - (capital expenditures - non cash charges) - increases in non-cash working capital

3) A version of Free cash flow to equity (FCFE) that assumes a constant debt to capital ratio is defined as _______.

a.

None of the other answers is correct

b.net income - [(capital expenditures - non cash charges) * (equity / capital)] - [increases in non-cash working capital * (equity / capital)]

c.

net income - (capital expenditures - non cash charges) - increases in non-cash working capital - net debt issuance

d.

net income - (capital expenditures - non cash charges) - increases in non-cash working capital + net debt issuance

e.

(earnings before interest and taxes)*(1-t) - (capital expenditures - non cash charges) - increases in non-cash working capital