USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 101

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You are using the free cash flow to equity (FCFE) technique to analyze the U.S. equity market. The beginning FCFE is $90, and the required rate of return is 10 percent. Free cash flows are expected to grow at a 10 percent rate for the next two years and then grow at a constant rate of 7 percent forever.
-Compute the current earnings multiple if the dividend payout ratio for the aggregate market is 60 percent, the required rate of return is 11 percent, and the dividend growth rate is 8 percent.

• A) 15
• B) 20
• C) 25
• D) 30
• E) 35

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Definitions:

Grazing Land

Land designated for agricultural use where animals, particularly livestock, can graze and feed on the grass.

Overfishing

The depletion of fish stocks due to fishing activities at a rate faster than they can replenish, leading to ecological imbalances.

Navajo Ceremony

A traditional spiritual practice among the Navajo people, involving rituals and ceremonies for healing, guidance, and other purposes, deeply rooted in their cultural beliefs.

Reciprocity

A mutual exchange of privileges or benefits, as in agreements between individuals or states, ensuring a balance of give-and-take.