A student wants to value a firm's market value, he starts his model from forecasting Equity Free Cash Flow (FCFE):

The target firm has the following FCFE,

$10 million next year;

$20 million the year after;

$30 million in 3 years;

and at year 3, the terminal value can be calculated based on similar firms' expected PE multiple of 10.

The earnings over year 3 are 2 times of year 3 FCFE and the payout ratio is 50% and all FCFE is comprised of dividends.

Note that the year 3 terminal valuation PE multiple excludes the cash flows paid at year 3.

The nominal required return on equity is 6% pa.

All rates are effective annual rates.

What is the firms current value of equity?

a.

$531.01 million

b.

$660.00 million

c.

$600.00 million

d.

$604.39 million

e.

$556.19 million