You Are Valuing the Equity of NewNil Corp

question 45

Multiple Choice

You are valuing the equity of NewNil Corp. using the FCFE approach and have estimated that the FCFE in the next three years will grow at 8 percent rate from last year's FCFE of $2.1 million. Beginning in year 4, you expect the cash flows to increase at a constant rate of 5 percent per year for the indefinite future. The cost of equity for the firm is 10 percent. What is the value of equity in this company? (Round final answer to the nearest million dollars.)

• A) $42 million
• B) $56 million
• C) $48 million
• D) $6 million

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