CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

Mark is doing a valuation of NCI Industries using the following information:

  • Beta of the stock: 1.2.
  • FCFE per share over the next two years: $8, $10.
  • Terminal value per share at the end of the second year: $60.
  • Risk-free rate: 4%.
  • Market rate of return: 15%.

Based on Mark's study and predictions, the value of NCI Industries' stocks should be ______ per share.
A. $56.78
B. $57.04
C. $57.79
Explanation: Cost of equity= 4% + 1.2 x (15% - 4%) = 17.2%.

The value per share is then $8/1.172 + ($10 + $60)/1.1722 = $57.79.

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