DCF with Terminal P/E

There are many ways to value an asset. Valuation is a science, but it is also an art. Each method may not provide identical answers, and they can sometimes be far off.

A DCF model that incorporates using multiples and free cash flow is shown on slides 38-42 for Tesla. Using a similar approach to slides 38-40, value a stock with the following information.

Assume

FCFE per share in time 0 = $1.00
FCFE per share in time 1 = $1.10
FCFE per share in time 2 = $1.20
FCFE per share in time 3 = $1.30
FCFE per share in time 4 = $1.40
FCFE per share in time 5 = $1.50
FCFE per share in time 6 = $1.60
FCFE per share in time 7 = $1.70
Assume change in capital (net fixed assets and net operating working capital) in time 7 are $0.50 per share.
Assume the P/E in time 7 is 17
Assume the cost of equity (the discount rate or r) is 10%.
What is this stock worth?

Note: Enter your answer with two decimals and without the $ sign. That is, if your answer is $50.514 then enter 50.51.

Trick 1: You must remember that FCFE = net income - investment. Investment is also called change in capital. It is change in net fixed assets + change in net operating working capital.

Trick 2: This is a two-stage model using the the P/E * E for the terminal value. You need to determine the present value of each FCFE, and then add the present value of the terminal value (P/E in time 7 * E in time 7).