Question

SI International had a FCFE of $122.1M last year and has 12.43M shares outstanding. SI's required return on equity is 11.3%, and WACC is 9.8%. If FCFE is expected to grow at 7.0% forever, the intrinsic value of SI's shares is Multiple Choice $14.76. $244.43. $108.00. $68.29.

Answer 1

The value per share = $375.379

Step-by-step explanation:

The intrinsic value of shares is the present value of the Free cash flow to equity (FFCE) discounted at cost of equity.

Total value of equity= FCFE× (1+g)/(r-g)

Total Value of equity= 122.1 × (1.07)/(0.113-0.07)= 3038.302326

The value per share = Total Value of company /Number of shares

= $3038.302326 / 12.43 units

= $244.43 per unit