The Growth in Per Share FCFE of CBS,Inc

question 122

Multiple Choice

The growth in per share FCFE of CBS,Inc.is expected to be 10%/year for the next two years,followed by a growth rate of 5%/year for three years; after this five year period,the growth in per share FCFE is expected to be 2%/year,indefinitely.The required rate of return on CBS,Inc.is 12%.Last year's per share FCFE was $2.00.What should the stock sell for today?

• A)$8.99
• B)$22.51
• C)$40.00
• D)$25.21
• E)$27.12

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Definitions:

Current Ratio

A financial metric evaluating a firm's capacity to settle debts due within a year by dividing its current assets by its current liabilities.

Federal Unemployment Tax

A tax imposed on employers to fund state workforce agencies.

Double-Declining-Balance

An accelerated depreciation method that doubles the rate of depreciation of an asset's value compared to the straight-line method.

Depreciation Rate

The percentage at which an asset's value decreases over time due to use, wear, or obsolescence.