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

question 110

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 present value now (Year 2009) of FCFE during the period of declining growth (that is for years 2014 to 2017) .

• A) $1,719,119
• B) $1,715,784
• C) $1,115,195
• D) $1,434,903
• E) $1,809,171

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Definitions:

Emotional Experience

Emotional experience encompasses the wide range of feelings, moods, and emotions that an individual can have, and involves the subjective interpretation and physiological response to external and internal stimuli.

Physiological Arousal

The body's automatic, physical response to stimuli, characterized by increased heart rate, breathing, and energy preparation, often associated with stress or excitement.

Capilano Bridge Experiment

An experiment that studied the misattribution of physiological arousal, where participants attributed their increased heart rate caused by a suspension bridge to an attraction to an interviewer.

Attractive

Pertains to possessing features, qualities, or characteristics that appeal to the aesthetic senses, especially sight, or which evoke interest or desire in others.