Exhibit 9-7
USE THE FOLLOWING INFORMATION IS FOR THE NEXT

question 9

Multiple Choice

Exhibit 9-7
USE THE FOLLOWING INFORMATION IS FOR THE NEXT PROBLEM(S)
At the end of the year 2009 the BRK Corporation had free cash flow to equity (FCFE) of $250,000 and shares outstanding of 200,000. The company projects the following annual growth rates in FCFE. $$\begin{array} { c c } \text { Year } & \text { Grawth Rate } \\\hline 2010 & 10 \% \\2011 & 15 \% \\2012 & 20 \% \\2013 & 25 \% \\2014 & 20 \% \\2015 & 15 \% \\2016 & 10 \% \\2017 & 7 \%\end{array}$$
From year 2018 onward growth in FCFE is expected to remain constant at 5% per year. The stock has a beta of 1.3 and the current market price is $55. Currently the yield on 10-year Treasury notes is 5% and the equity risk premium is 4%.
-Refer to Exhibit 9-7. Calculate the required rate of return on equity.

• A) 5%
• B) 9.2%
• C) 10.2%
• D) 10%
• E) 4.3%

---

Definitions:

Asian Americans

A diverse group of Americans of Asian descent, which includes people from East Asia, South Asia, Southeast Asia, and other regions.

Anglo-Americans

People whose ancestry originates from English-speaking countries, particularly those living in the United States.

Social Support

A network of family, friends, and peers that offer emotional, informational, and material assistance to individuals.

Oxytocin Levels

The concentration of oxytocin, a hormone associated with social bonding, trust, and relationship-building, in the bloodstream.