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Business, 15.04.2020 01:22 ForbesDrew

Assume an all equity firm has been growing at a 15% annual rate and is expected to continue to do so for 3 more years. At that time, growth is expected to slow to a constant 4% rate. The firm maintains a 30% payout ratio, and this year's retained earnings net of dividends were $1.4 million. The firm's beta is 1.25, the risk-free rate is 8%, and the market risk premium is 4%. If the firm has 1 million shares outstanding, what is the market value of the firm's common equity? a. $ 7.32 million b. $10.56 million c. $12.96 million d. $ 6.41 million e. $ 9.17 million

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Assume an all equity firm has been growing at a 15% annual rate and is expected to continue to do so...
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