Troy is preparing a valuation of Logistic Solutions using a multiple-stage FCFE valuation model with the following estimates. The FCFE per share for the current year is $3.00. The FCFE is expected to grow at 15 percent for the next three years, then at 11 percent annually for the following four years, and finally at a constant growth rate of 8 percent starting the eighth year. Logistic Solutions estimated beta is 1.3, and Troy believes that the current market conditions dictate a 3.3 percent risk free rate and an 7.0 percent market risk premium. The following are five independent questions

a) Given Troys assumptions and approach, estimate the value of a share of Logistic Solutions.

b) If the terminal growth rate is projected to be 7%, rather than 8%, re-estimate the value of a share of Logistic Solutions. Does this new estimate make sense?

c) If the market risk premium is assumed to be 6%, rather than 7%, re-estimate the value of a share of Logistic Solutions. Does this new estimate make sense?

d) If the systematic risk (beta) of the stock increases from 1.3 to 1.50 re-estimate the value of a share of Logistic Solutions. Does this new estimate make sense?

e) If Logistic Solutions estimated beta is statistically insignificant, suggest an alternative approach to arrive at the required rate of return (k) on the stock and use this new k to re-estimate the value of a share of Logistic Solutions. Assume Logistic Solutions bonds outstanding are traded at a yield of 6.8% and the risk premium required for Logistic Solutions equity shareholders over bond holders is 5%.