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Consider the table given below to answer the following question. Year 1 2 3 4 5 6 7 8 9 10 Asset value 8.00 9.20
Consider the table given below to answer the following question.
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | ||||||||||
Asset value | 8.00 | | 9.20 | | 10.58 | | 12.17 | | 13.63 | | 15.26 | | 17.09 | | 18.63 | | 20.31 | | 22.14 | |
Earnings | 1.20 | | 1.38 | | 1.59 | | 1.83 | | 2.04 | | 2.21 | | 2.39 | | 2.52 | | 2.23 | | 2.44 | |
Net investment | 1.20 | | 1.38 | | 1.59 | | 1.46 | | 1.64 | | 1.83 | | 1.54 | | 1.68 | | 1.83 | | 1.99 | |
Free cash flow (FCF) | | | | | | | 0.37 | | 0.41 | | 0.38 | | 0.85 | | .84 | | 0.41 | | 0.44 | |
Return on equity (ROE) | 0.15 | | 0.15 | | 0.15 | | 0.15 | | 0.15 | | 0.145 | | 0.14 | | 0.135 | | 0.11 | | 0.11 | |
Asset growth rate | 0.15 | | 0.15 | | 0.15 | | 0.12 | | 0.12 | | 0.12 | | 0.09 | | 0.09 | | 0.09 | | 0.09 | |
Earnings growth rate | 0.15 | | 0.15 | | 0.15 | | 0.12 | | 0.08 | | 0.08 | | 0.05 | | 0.11 | | ?0.09 | | 1.12 | |
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Assuming that competition drives down profitability (on existing assets as well as a new investment) to 14.5% in year 6, 14% in year 7, 13.5% in year 8, and 11% in year 9 and all later years. What is the value of the concatenator business?
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