Exhibit 12.7 Use the Information Below for the Following Problem(S)

question 10

Multiple Choice

Exhibit 12.7
Use the Information Below for the Following Problem(S)
You are using the free cash flow to equity (FCFE) technique to analyze U.S. equity market. The beginning FCFE is $90 and the required rate of return is 10%. Free cash flows are expected to grow at a 10% rate for the next two years and then grow at a constant rate of 7% forever.
-Refer to Exhibit 12.7.What would the estimated value of the U.S.market be today using the FCFE approach,if the growth rate was expected to be a constant 8% indefinitely,instead of the 10% and 7% estimates?

• A) 4,500
• B) 4,728
• C) 4,860
• D) 4,923
• E) 5,042

Examine different forms of government and their efficacy in promoting the well-being of citizens.

Investigate the balance between individual freedom and societal security.

Understand the historical and philosophical perspectives on the nature of beauty and art.

Assess the role of emotions and beliefs in the appreciation of art.

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Definitions:

Income Elasticity

A measure of how much the demand for a product changes with a change in consumers' income.

Completely Inelastic

A situation in which the demand or supply for a good or service is totally unresponsive to price changes.

Inelastic

Describes a condition where the demand or supply for a good or service is not significantly changed by changes in price.

Elastic

Elasticity in economics refers to the responsiveness of demand or supply to changes in price or income.