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2) You are given the following information for CareMed Corp.: 2020 FCFE $8,000,000 FCFE growth, 2021...

2) You are given the following information for CareMed Corp.:

2020 FCFE $8,000,000

FCFE growth, 2021 – 2024 6.6%

Constant growth in FCFE beyond 2024 5.0%

First dividend expected in year-end 2022 $2.25

Growth in dividend in 2023 and 2024 9%

Constant growth in dividend beyond 2024 8.6%

Shares outstanding 1,500,000

Beta coefficient 1.5

Risk-free rate 3.0%

Rate of return on the Market Portfolio 8.0%

a) What is the appropriate discount rate for CareMed’s stock?

b) What is the intrinsic value of CareMed’s stock as of year-end 2020 using the FCFE method?

c) What is the intrinsic value of CareMed’s stock as of year-end 2020 using the Discounted Dividend method?

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