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Klausenheimer Corporation has a book value of equity of $5,000 at the beginning of 2010, and net income of $1,200 for year ended 2010. It
Klausenheimer Corporation has a book value of equity of $5,000 at the beginning of 2010, and net income of $1,200 for year ended 2010. It pays no dividends, and its cost of equity capital is 10%. It expects return on beginning of year equity to remain constant for 2011 and 2012 and decrease to 10% thereafter. Its price to book ratio at the end of 2010 should be
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