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

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Definitions:

Costs to Society

The total burden that societal behaviors, decisions, or policies place on the welfare of the community, including both direct costs and indirect consequences.

Total Surplus

The sum of consumer surplus and producer surplus; a measure of the overall benefit to society from the production and consumption of goods or services.

Market Price

The present cost at which a service or asset is available for purchase or sale in a specific market.

Total Surplus

The sum of consumer and producer surpluses, representing the total net benefit to society from the production and consumption of goods and services.