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Calculate the intrinsic value of karoo limited

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Reference no: EM132681541

Question 1. An analyst is conducting a valuation of Times Limited; it pays no dividends and all earnings are reinvested. The firm is expected to report a ROE of 20% over the next four years. The book value per share of Times Limited is currently R35 and the required rate of return on equity is 10%. Forecasted earnings for years one to four are equal to ROE multiplied by beginning book value.

Calculate the intrinsic value of Karoo Limited using a residual income model, assuming that after four years, continuing residual income falls to zero.

Reference no: EM132681541

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