fcfe3st - ThreestageFCFEModel THREE-STAGE FCFE DISCOUNT...

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 Three-stage FCFE Model Page  THREE-STAGE FCFE DISCOUNT MODEL This model is designed to value the equity in a firm with three stages of growth - an initial period of high growth, a transition period of declining growth and a final period of stable growth. As umptions 1. The firm is as umed to be in an extraordinary growth phase cur ently. 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 fol owing 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 Inputs to the model General Inputs Cur ent Earnings per share = $0.85 (in cur ency) Cur ent Dividends per share = $0.00 (in cur ency) Cur ent Capital Spending/sh = $1.00 (in cur ency) Cur ent Depreciation / share = $0.80 (in cur ency) Cur ent Revenues/ share = $12.50 Working Capital/ share = $5.00 (in cur ency) 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 cur ency) Do you have an outside estimate of growth ? Yes (Yes or No) If yes, enter the estimated growth:
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This note was uploaded on 01/29/2012 for the course FIN 6000 taught by Professor Banko during the Fall '11 term at University of Florida.

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