Pat is preparing a valuation of Intergalactic Services Corp. (ISC) using a multiple-stage FCFE valuation model with the following estimates. The FCFE per share for the current year is $1.25. The FCFE is expected to grow at 12 percent for the next four years, then at 8 percent annually for the following three years, and finally at a constant growth rate of 5 percent starting the eighth year. ISCs estimated beta is 1.15, and Pat believes that the current market conditions dictate a 2.50% risk free rate and a 12% expected market return.

The following are five independent questions.

1. Given Pats assumptions and approach, estimate the value of a share of ISC.

I know for part a I have to calculate FCFE which I have done, I am a bit confused on how to calculate Terminal Value, and present value of fcfe. If you could explain how to calculate these as well as the calculations, I would appreciate it.