Exhibit 13.3 Use the Information Below for the Following Problem(S)

question 19

Multiple Choice

Exhibit 13.3
Use the Information Below for the Following Problem(S)
The Home Appliance Industry had free cash flow to equity (FCFE) of $87 for the most recent year ending reported yesterday. The industry anticipates a growth rate of 8% for the next three years due to favorable economic conditions. However, the growth rate is expected to decline to 4% after three years and remain at that level indefinitely. The required rate of return is 12% for this industry.
-Refer to Exhibit 13.3.Calculate the intrinsic value of the Home Appliance Industry today.

• A) $605.03
• B) $1,014.09
• C) $1,256.88
• D) $1,424.73
• E) $1,729.76

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Definitions:

Scientific Method

The steps in a research process, including observation, hypothesis testing, analysis of data, and generalization.

Deductive Reasoning

A logical process in which a conclusion is based on the concordance of multiple premises that are generally assumed to be true.

Inductive Method

A reasoning method where several assumptions, considered true or mostly true, are merged to derive a particular outcome.

Hawthorne Effect

A phenomenon in which individuals modify an aspect of their behavior in response to their awareness of being observed.