Zeta Technologies Has the Following Projections A) $21,165
B) $23,282
C) $25,610
D) $28,171
E) $30,988

question 50

Multiple Choice

Zeta Technologies has the following projections. It has no non-operating assets. Calculate Zeta's intrinsic value of equity using the FCFE model.

$\begin{array}{l}\begin{array} { l } \\ \\\text { FCFE }\\\text { Total debt }\\\text {Interest rate on debt }\\\text {Tax rate}\\\text { Long-term growth rate}\\\text { Required return on equity }\\\end{array}\begin{array} { l } \text { Cunent }\\\text { Year } & \text { Year 1 } & \text { Year 1 } & \text { Year 3 } \\NA& 1,000 & 1,200 & 1,248 \\3,000 & 3,900 & 4,290 & 4,462 \\6 \% & 6 \% & 6 \% & 6 \% \\25 \% & 25 \% & 25 \% & 25 \%\\4\%\\9\%\end{array}\end{array}$


 
 

• A) $21,165
• B) $23,282
• C) $25,610
• D) $28,171
• E) $30,988

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Definitions:

Right

In finance, typically refers to a contractual entitlement to purchase additional shares at a specified price before a certain date, often associated with share issuance.

Obligation

A legal or financial duty or responsibility to make payments, fulfill contracts, or otherwise perform as agreed.

Forward Contract

A customized contract between two parties to buy or sell an asset at a specified price on a future date, used to hedge or speculate on the price movement of the underlying asset.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits over a specific period of time.