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For a mature company, ABC Inc., the analyst has estimated a value of $2 billion, growing at the inflation rate (2% a year) each year

For a mature company, ABC Inc., the analyst has estimated a value of $2 billion, growing at the inflation rate (2% a year) each year forever while maintaining a cost of capital of 7%, but he incorrectly assumes that the firm will earn zero excess returns (a return on its capital in excess of the cost of capital) in perpetuity. If you believe that the firm will be able to generate an excess return of 5% in perpetuity, estimate the correct value for the firm.

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