IBM Co. is a company in USA. An analyst estimated the normalized FCFE for IBM Co. to be 750 $ (per share) for the year just ended. The real country return for USA is 4.5%. to estimate the required return for IBM, the analyst makes the following adjustments to the real country return: an industry adjustment of +0.80%, a size adjustment of -0.30%, and a leverage adjustment of +0.55%. the long-term real growth rate for USA is estimated to be 2.5%, and the analyst expects the real growth rate of IBM to track the country rate. Using the single-stage FCFE valuation model, with real values for the discount rate and FCFE growth rate; the estimated value per share is closest to: a. 10,721.34$/share b. 15,843.54$/share c. 20,865.45$/share d. 25,204.92$/share e. None of the proposed answers are correct
IBM Co. is a company in USA. An analyst estimated the normalized FCFE for IBM Co. to be 750 $ (per share) for the year just ended. The real country return for USA is 4.5%. to estimate the required return for IBM, the analyst makes the following adjustments to the real country return: an industry adjustment of +0.80%, a size adjustment of -0.30%, and a leverage adjustment of +0.55%. the long-term real growth rate for USA is estimated to be 2.5%, and the analyst expects the real growth rate of IBM to track the country rate. Using the single-stage FCFE valuation model, with real values for the discount rate and FCFE growth rate; the estimated value per share is closest to: a. 10,721.34$/share b. 15,843.54$/share c. 20,865.45$/share d. 25,204.92$/share e. None of the proposed answers are correct
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![IBM Co. is a company in USA. An analyst estimated the normalized FCFE
for IBM Co. to be 750 $ (per share) for the year just ended. The real country
return for USA is 4.5%. to estimate the required return for IBM, the analyst
makes the following adjustments to the real country return: an industry
adjustment of +0.80%, a size adjustment of -0.30%, and a leverage
adjustment of +0.55%. the long-term real growth rate for USA is estimated
to be 2.5%, and the analyst expects the real growth rate of IBM to track the
country rate. Using the single-stage FCFE valuation model, with real values
for the discount rate and FCFE growth rate; the estimated value per share is
closest to:
a. 10,721.34$/share
b. 15,843.54$/share
c. 20,865.45$/share
d. 25,204.92$/share
e. None of the proposed answers are correct](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff5c94d30-38fe-49cd-9f70-67adc0b8c090%2F0d6227f7-c0d0-4ef0-8144-4573ba49a813%2F64p0218_processed.png&w=3840&q=75)
Transcribed Image Text:IBM Co. is a company in USA. An analyst estimated the normalized FCFE
for IBM Co. to be 750 $ (per share) for the year just ended. The real country
return for USA is 4.5%. to estimate the required return for IBM, the analyst
makes the following adjustments to the real country return: an industry
adjustment of +0.80%, a size adjustment of -0.30%, and a leverage
adjustment of +0.55%. the long-term real growth rate for USA is estimated
to be 2.5%, and the analyst expects the real growth rate of IBM to track the
country rate. Using the single-stage FCFE valuation model, with real values
for the discount rate and FCFE growth rate; the estimated value per share is
closest to:
a. 10,721.34$/share
b. 15,843.54$/share
c. 20,865.45$/share
d. 25,204.92$/share
e. None of the proposed answers are correct
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