Problem 2: You anticipate that the firm will grow at 30% for two years, then 20% for three years and 4% thereafter. The target capital structure is 60% of equity, 30% of bonds and 10% of preferred stocks. The number of shares of preferred stocks is 20 million and its price is $30. The price of the common stock is $21 a Calculate the current value of the firm's stock using the FCFE discount model. b/ Calculate the P/FCFE ratio. c/ If this ratio for the industry is 10 then that firm is undervalued or overvalued? d Is it better for shareholders if the firm pays dividend or reinvest in the firm? Why? e/ Looking at the evolution of an industry, when does it make more sense to pay dividends? Problem 2: You anticipate that the firm will grow at 30% for two years, then 20% for three years and 4% thereafter. The target capital structure is 60% of equity, 30% of bonds and 10% of preferred stocks. The number of shares of preferred stocks is 20 million and its price is $30. The price of the common stock is $21 a Calculate the current value of the firm's stock using the FCFE discount model. b/ Calculate the P/FCFE ratio. c/ If this ratio for the industry is 10 then that firm is undervalued or overvalued? d Is it better for shareholders if the firm pays dividend or reinvest in the firm? Why? e/ Looking at the evolution of an industry, when does it make more sense to pay dividends