CHAPTER 12 PROBLEM 9

FINANCE  Investment Analysis and Portfolio Management CHAPTER 12 PROBLEM 9
You are analyzing the U.S. equity market based upon the S&P Industrials Index and using   the present value of free cash flow to equity technique. Your inputs are as follows  ：     Beginning FCFE  ：  $40.00   k=0.09   Growth Rate:   Year 1-3: 9  ％          
       4-6: 8  ï¼…          
       7 and beyond: 7  ï¼… 
    a.   Assuming   that   the   current   value   for   the   S&P   Industrials   Index   is   1600,   would   you   underweight, overweight, or market weight the U.S. equity market?   b.   Assume   that   there   is   a   1   percent   increase   in   the   rate   of   inflation--what   would   be   the   market's value and how would you weight the U.S. market? State your assumptions.

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