SGA Consulting Had a FCFE of $3

question 56

Multiple Choice

SGA Consulting had a FCFE of $3.2M last year and has 3.2M shares outstanding.SGA's required return on equity is 13% and WACC is 11.5%.If FCFE is expected to grow at 8.5% forever,the intrinsic value of SGA's shares are ____________.

• A)$21.60
• B)$26.56
• C)$244.42
• D)$24.11
• E)none of the above

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Definitions:

Free Cash Flow

The amount of cash generated by a business after accounting for operating expenses and capital expenditures, available for distribution among shareholders.

Interest Expense

The cost incurred by an entity for borrowed funds, typically stated as an annual rate.

Net Debt

A financial metric that calculates a company's total debt minus its cash and cash equivalents, assessing its leverage.

Equity Holders

Investors who own shares of stock in a company, giving them a claim on the company's assets and earnings.