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

question 90

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 intrinsic value of the stock now (Year 2009) .

• A) $55
• B) $48.52
• C) $77.79
• D) $35.77
• E) $62.34

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Definitions:

Neurons

The basic working units of the brain and the nervous system, responsible for receiving, transmitting, and processing information through electrical and chemical signals.

Structure

The manner in which components are arranged or organized to form a whole; can refer to physical buildings, biological organisms, or abstract systems.

Pattern Recognition

Pattern recognition is the ability to detect arrangements of characteristics or data that signify a familiar object or feature.

Left Hemisphere

The half of the brain typically responsible for analytical and linguistic tasks, including language comprehension, speech, and logic.