Question
Use FCFE to determine the value of a companys stock price when last years sales were $4.75/share, sales growth is expected to be 2.5% for
Use FCFE to determine the value of a companys stock price when last years sales were $4.75/share, sales growth is expected to be 2.5% for the next four years and 1.75% after that, profit margin is expected to remain around 18%, return on equity has been averaging 13.5%, and the required rate of return is 8.5%. What is the PVGO and does it constitute a large risk to the stock price?
Group of answer choices
A.$2.80; not much risk since growth is such a small share
B.$14.09; this is nearly all the value of the firm which indicates it is riskier than average
C.$1.30; it doesn't pose much risk since it's only a small part of the value of the company
D.$10.20; it could present some risk since it is almost a third of the value of the firm
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