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Company ABCs free cash flow to equity (FCFE) was $50 million at the beginning of the year. The FCFE is expected to grow at a
Company ABCs free cash flow to equity (FCFE) was $50 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 12%. In year three and thereafter (forever) the FCFE growth rate will be 2% and the required return on the stock will be 10%. The company has 10 million shares outstanding. Find the fair price of ABCs stock.
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