Question
23. Look at the financial forecasts for Growth Tech given in Table 4.4. This time you know that the cost of capital is 12%. a.
23. Look at the financial forecasts for Growth Tech given in Table 4.4. This time you know that the cost of capital is 12%. a. Find the value of Growth-Techs stock. b. What part of the value reflects the discounted value of P3, the price forecasted for year 3? c. What part of P3 is from the present value of growth opportunities (PVGO) after year 3? d. Suppose that competition will catch up to Growth-Tech by year 4 so that it can earn only its cost of capital on any investments in year 4 or subsequently. What is Growth-Techs stock worth under this assumption?
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International Financial Management
Authors: Cheol Eun
9th Edition
1260788865, 9781260788860
