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Basic Question 1 of 3

  • FCFE = $1.65 per share.
  • Target debt ratio = 30%.
  • Expected return on the market =15%.
  • Risk-free rate is 5%.
  • Beta = 1.1
  • Growth rate of FCFE = 6%.

Calculate the equity value.
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User Contributed Comments 4

User Comment
katybo risk premium?
duoluo r = RFR + beta*(Return on Market - RFR) = 16%
aravinda Here is how I remember

Market premium = E(Rm)
Market Risk premium = { E(Rm) - RFR }
Equity Risk Premium =same as above= {E(Rm) - RFR}
Risk Premium = Beta { E(Rm) - RFR }
UcheSam Expected return on the market is no the same as risk premium.
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Colin Sampaleanu

Colin Sampaleanu

Learning Outcome Statements

describe approaches for calculating the terminal value in a multistage valuation model;

CFA® 2025 Level II Curriculum, Volume 4, Module 22.