Estimating Equity Value Using FCFE

In the context of equity valuation, Free Cash Flow to Equity (FCFE) models are essential for assessing a company's intrinsic value based on its projected future cash flows available to its equity shareholders. When estimating FCFE, consider the net income of the company, adjustments for non-cash items, changes in working capital, and capital expenditures. Steven, a financial analyst, is evaluating a company that reported a net income of $5 million, depreciation of $1 million, changes in working capital of $500,000, and capital expenditures of $2 million. Additionally, he expects the company's FCFE to grow at a constant rate of 4% after an initial high-growth period. If he decides to apply a discount rate of 10% in his valuation, what would be the estimated value of equity after the high growth phase? Assume the company's FCFE for next year is equal to the current FCFE adjusted by the growth rate of 4%.