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Firm ABC projects an ROE of 10%, and it will maintain a plowback ratio of 50%. Its earnings at the end of this year (EPS1)
Firm ABC projects an ROE of 10%, and it will maintain a plowback ratio of 50%. Its earnings at the end of this year (EPS1) will be $3 per share. Investors expect an 8% rate of return on the stock.
- At what price would you expect the firm to sell?
- What is the present value of growth opportunities
- What would be the price and the present value of growth opportunities if the firmplanned to reinvest only 40% of its earnings?
- Firm ABC is all-equity-financed and has no debt. Suppose the tax rate is 40%.What is the operating return on assets (ROA)?
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International Finance The Markets And Financial Management Of Multinational Business
Authors: Maurice D. Levi
3rd Edition
0070376875, 978-0070376878
