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Problem 8 (8p) You have been reading about the Moncton Computer Company (MCC), which currently retains 90% of its earnings ($5 a share this year).
Problem 8 (8p) You have been reading about the Moncton Computer Company (MCC), which currently retains 90% of its earnings ($5 a share this year). It earns an ROE of almost 30%. Assuming a required return of 14%, how much would you pay for MCC on the basis of the relative valuation model? Discuss your answer. What would you pay for Moncton Computer if its retention rate was 60% and its ROE was 19%? Show your work
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