The Growth in Per Share FCFE of CBS, Inc

question 6

Multiple Choice

The growth in per share FCFE of CBS, Inc.is expected to be 10% per year for the next two years, followed by a growth rate of 5% per year for three years.After this five-year period, the growth in per share FCFE is expected to be 2% per year, indefinitely.The required rate of return on CBS, Inc.is 12%.Last year's per share FCFE was $2.00.What should the stock sell for today?

• A)$8.99
• B)$22.51
• C)$40.00
• D)$25.21

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Definitions:

Increase

A rise or growth in quantity, size, strength, or another measure.

Dollars

A unit of currency used in various countries, including the United States, Canada, Australia, and New Zealand.

Residuals

Differences between observed and predicted values in a statistical model, used to assess the model's fit.

Error Variable

The difference between observed and predicted values in a statistical model, often referred to as the residual.