Calculate the intrinsic value

Reference no: EM1350144

The Home Appliance Industry had free cash flow to equity (FCFE) of $87 for the year ending December 31, 2007. The industry anticipates a growth rate of 8% for the next three years due to favorable economic conditions. However the growth rate is expected to decline to 4% after three years and remain at that level indefinetly. The required rate of return is 12% for the industry.

a. Calculate the intrinsic value of the Home Appliance Industry at the end of the 8% growth period three years from now.

b. Calculate the intrinsic value of the Home Appliance Industry today.

Reference no: EM1350144

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