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Consider a company with the following financial information: Sales $1,550,000 CGS 350,000 Depreciation 400,000 Interest 150,000 Income tax 260,000 Dividends 300,000 Common shares outstanding 500,000

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Consider a company with the following financial information: Sales $1,550,000 CGS 350,000 Depreciation 400,000 Interest 150,000 Income tax 260,000 Dividends 300,000 Common shares outstanding 500,000 P/EBITDA 10X A. Calculate the market price of the company's common shares using a relative valuation approach. B. Calculate the trailing and forward P/E ratio. Assume a 6 percent earnings growth. C. Calculate the trailing and forward P/E ratio using the following assumptions: The risk-free rate of interest is 5 percent; B is 0.65; the market risk premium is 5 percent; dividends and earnings grow at 6 percent indefinitely; and the company maintains its current dividend payout ratio

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