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need answers for all of these Use the following information to answer questions 11 through 13 An analyst uses the following summary balance sheets to
need answers for all of these Use the following information to answer questions 11 through 13 An analyst uses the following summary balance sheets to value a firm at the end of 1999 (in millions of dollars): 1999 1998 Net operating assets 4,572 3,941 Net financial obligations 1,243 1,014 Common shareholders' equity 3,329 2,927 The analyst forecasts that the firm will earn a retum on net operating assets (RNOA) of 12% in 2000 and a residual operating income of $91.4 million. What is the required return for operations that the analyst is using in his residual operating income forecast? 12% 9.35% 10% none of the options is correct The analyst forecasts that the residual operating income in 2000 will continue as a perpetuity. What value of the equity does this imply? $3,329 million $4,243 million $4,091 million $3,420 million Using the required return for the operations calculated in question 11 and the value calculated in question 12, calculate the required return for the equity. The after-tax cost of debt is 6%. 13.48% 12.03% 11.59% 11.17%
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