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2. Fiscal year end DPS (GBP) Jun-14 Jun-15 30 20 Jun-16 40 Jun-17 50 It is June 2013. Above are consensus estimates for a large

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2. Fiscal year end DPS (GBP) Jun-14 Jun-15 30 20 Jun-16 40 Jun-17 50 It is June 2013. Above are consensus estimates for a large firm which belongs to a mature sector of stable growth in sales. The firm's beta is 1.1, risk free rate is 3% and market risk premium is 8%. What is the firm's horizon value in Jun-2016 if the firm's ROE and plowback ratio stabilise at 15% and 0.4 respectively from 2017 onwards? What is the firm's intrinsic value now? (12.5 marks)

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