Calculation of market value of the firm

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Reference no: EM1317110

Firms C and D have time zero EBIT of $1,000. The required return on equity for both of these unlevered firms is 10%. The marginal corporate tax rate is 34%. Firm C has a dividend pay-out ratio of 20% and a dividend growth rate of 8%. Firm D has a dividend pay-out ratio of 80% and a dividend growth rate of 4%.

Which firm has the highest market value?

Reference no: EM1317110

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