fcfe3st - ThreestageFCFEModel THREE-STAGE FCFE DISCOUNT...

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 Three-stage FCFE Model Page  THREE-STAGE FCFE DISCOUNT MODE This model is designed to value the equity in a firm with three stages of gro period of high growth, a transition period of declining growth and a final pe growth. Assumptions 1. The firm is assumed to be in an extraordinary growth phase currently. 2. This extraordinary growth is expected to last for an initial period that has to be specified. 3. The growth rate declines linearly over the transition period to a stable growth rate. 4. The relationship between capital spending and depreciation changes consistently with the growth rate. The user should enter the following inputs: 1. Length of each growth phase 2. Growth rate in each growth phase 3. Capital Spending, Depreciation and Working Capital in each growth phase. 4. Costs of Equity in each growth phase
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 Three-stage FCFE Model Page  Inputs to the model General Inputs Current Earnings per share = $0.85 (in currency) Current Dividends per share = $0.00 (in currency) Current Capital Spending/sh = $1.00 (in currency) Current Depreciation / share = $0.80 (in currency) Current Revenues/ share = $12.50 Working Capital/ share = $5.00 (in currency) Chg. Working Capital/share = $0.50 Do you want to enter cost of equity directly? No (Yes or No) If yes, enter the cost of equity = (in percent) If no, enter the inputs to the cost of equity for the initial high growth stage Beta of the stock = 1.1 Riskfree rate= 7.00% (in percent) Risk Premium= 5.50% (in percent) Earnings Inputs Growth Rate during the initial high growth phase Enter length of extraordinary growth period = 5 (in years) Do you want to use the historical growth rate? No (Yes or No) If yes, enter EPS from five years ago = $0.90 (in currency) Do you have an outside estimate of growth ? Yes (Yes or No)
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This note was uploaded on 06/28/2010 for the course MKTG 00HP01 taught by Professor Himanshu during the Spring '10 term at Indiana Institute of Technology.

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fcfe3st - ThreestageFCFEModel THREE-STAGE FCFE DISCOUNT...

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