Which of the following long – term FCFE growth rates

Question
Ryan Leigh is preparing a presentation that analyzes the valuation of the common stock of two companies under consideration as additions to his firm€™s recommended list, Emerald and Holt Leigh has prepared preliminary valuations of both companies using an FCFE model and is also preparing a value estimate for Emerald using a discount model. Holt€™s 2007 and 2008 financial statements, contained in Exhibits 4 – 24 and 4 – 25 , are prepared in accordance with U.S. GAAP. EXHIBIT 4-24 Holt Consolidated Balance Sheets (US$ millions) EXHIBIT 4-25 Holt for the Year Ended 31 December 2008 (US$ millions) Total revenues ……………………………………………………..$3,323 Cost of goods sold …………………………………………………1,287 Selling, general, and administrative expenses ……………. Earnings before interest, taxes, depreciation, and amortization (EBITDA) ……………………………………1,178 Depreciation expense ……………………………………………. Operating income ……………………………………………………908 Interest expense ……………………………………………………. Pretax income ………………………………………………………..713 Income tax (at 32 percent) ……………………………………… Net income ……………………………………………………………$485 Leigh presents his valuations of the common stock of Emerald and Holt to his supervisor, Alice Smith. Smith has the following questions and comments: Leigh responds to each of Smith€™s points as follows:
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