Based upon these forecasts of fundamentals

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1. The free cash flow to the firm is $200 million in perpetuity, the cost of equity equals 10%, and the WACC is 8%. If the market value of the debt is $1 billion, what is the value of the equity using the free cash flow valuation approach?

2. For FPL Group, Inc. (FPL), a utility analyst forecasts a long-term payout rate of 30 percent, a long- term growth rate of 6 percent, and a required rate of return of 9 percent. Based upon these forecasts of fundamentals, what is FPL’s justified leading P/E?

Reference no: EM131859723

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