Exhibit 13.4 Use the Information Below for the Following Problem(S)

question 45

Multiple Choice

Exhibit 13.4
Use the Information Below for the Following Problem(S)
The Furniture Manufacturing Industry had free cash flow to equity (FCFE) of $63 for the most recent year ending reported yesterday. The industry is in the mature stage and anticipates a growth rate of 4% indefinitely. The required rate of return is 11% for this industry.
-Refer to Exhibit 13.4.Suppose unexpected inflation suddenly increases by 2 percent and there are no other changes in expectations.What will be the new intrinsic value of the Furniture Manufacturing Industry today?

• A) $700
• B) $728
• C) $989
• D) $1,260
• E) $1,310

---

Definitions:

Market Rate

The prevailing price or interest rate available in the marketplace for goods, services, or securities.

Annual Dividend

The total dividend payment a shareholder receives from a stock over the course of a year.

Dividends Increasing

A situation where a company's dividend payouts are rising over time, often indicating financial health and profitability.

Cumulative Voting

A voting system in corporate governance that allows shareholders to allocate all their votes to one candidate, enhancing minority shareholders' ability to elect their preferred board member.