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Assume that the prevailing interest rate is 8% per year for value firms and 12% per year for growth firms. A growth firm with earnings

Assume that the prevailing interest rate is 8% per year for value firms and 12% per year for growth firms. A growth firm with earnings of $100,000 has a market value of $100,000,000, while a value firm with earnings of $1,000,000 has a market value of $20,000,000.

a. What are the implicit growth rates?

b. What are the PVGOs?

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