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5. Company ABC's free cash flow to equity (FCFE) was $40 million at the beginning of the year. The FCFE is expected to grow at
5. Company ABC's free cash flow to equity (FCFE) was $40 million at the beginning of the year. The FCFE is expected to grow at a rate of 20% for the next two years when the required return on the stock will be 15%. In year three and thereafter (forever) the FCFE growth rate will be 2% and the required return on the stock will be 12%. The company has 10 million shares outstanding. Find the fair price of ABC's stock (ignoring the cash flow generated in the past, including that in year 0)
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