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

question 72

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 intrinsic value of the industry now (Year 2004) .

• A) $155
• B) $143.52
• C) $177.79
• D) $135.77
• E) $162.34

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Definitions:

Nonparametric Test

A type of statistical test that does not assume a specific distribution for the data, often used when data doesn't meet the assumptions required for parametric tests.

Normally Distributed

Describes a probability distribution that is symmetrical around its mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Abnormally Distributed

Indicative of a probability distribution that does not follow a normal distribution pattern, potentially skewed or featuring heavy tails.

Un-standardized Test Statistic

A test statistic that has not been converted to a standard form, representing raw effect sizes or differences observed in data.