Calculate the intrinsic value of john limited

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An analyst is conducting a valuation of John Limited. The firm pays no dividends, and all earnings are reinvested. The firm is expected to report a ROE of 35% over the next four years. The book value per share of John Limited is currently $50 and the required rate of return on equity is 12%. Forecasted earnings for years one to four are equal to ROE multiplied by beginning book value.

Problem 1: Calculate the intrinsic value of John Limited using a residual income model, assuming that after four years, continuing residual income remains forever at year 4's residual income.

Reference no: EM132831274

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