Using the information below, value the stock of Meerkat Publishing, Inc. using the free cash flow from equity (FCFE) valuation method.
Which of the following choices is closest to the correct answer? The per share value of Meerkat Publishing is:
Click on the arrows to vote for the correct answer
A. B. C. D.Explanation
The FCFE is calculated as follows (all amounts in million of $ except per share price):
Step 1: Calculate Present Value of Each Year's FCFE
Step 2: Calculate Present Value of final cash flow times FCFE multiple
Step 3: Calculate per share value
Add up PV of FCFE and end value and divide by number of shares outstanding = (10.67 + 11.85 + 15.45 + 339.93) / 11.5 =32.86