Exhibit 13 From Year 2013 Onward Growth in FCFE Is Expected to

question 48

Multiple Choice

Exhibit 13.2
Use the Information Below for the Following Problem(S)
At the end of the year 2004 the Office Equipment Industry had free cash flow to equity (FCFE) of $2.50 per share. The following annual growth rates in FCFE are projected:
$$\begin{array} { c c } \text { Year } & \text { Grapth Rata } \\\hline 2005 & 10 \% \\2006 & 15 \% \\2007 & 20 \% \\2008 & 25 \% \\2009 & 20 \% \\2010 & 15 \% \\2011 & 10 \% \\2012 & 7 \%\end{array}$$
From year 2013 onward growth in FCFE is expected to remain constant at 5% per year. The industry has a beta of 0.90 and the current industry price is $105. Currently the yield on 10-year Treasury notes is 5% and the equity risk premium is 4%
-Refer to Exhibit 13.2.Calculate the present value now (Year 2004) of FCFE during the period of increasing growth (that is for years 2005 to 2008) .

• A) $17.19
• B) $14.15
• C) $11.59
• D) $15.78
• E) $18.09

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Definitions:

Frontotemporal Lobar Degeneration

A form of dementia characterized by progressive damage to the frontal and temporal lobes of the brain, affecting behavior, language, and movement.

Age 70

A reference to being seventy years old, a stage in late adulthood characterized by continued cognitive, emotional, and social development.

Alzheimer's Disease

A progressive neurodegenerative disorder characterized by memory loss, cognitive decline, and personality changes, leading to severe impairment in daily functioning.

Genetic

Relating to genes or heredity, involving the transmission of characteristics from parents to offspring through DNA.