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Compute the expected valuation of PP Ltd

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Question - PP Ltd paid a dividend of K250, 000 this year. The current return to shareholders of companies in the same industry as PP Ltd is 12%, although it is expected that an additional risk premium of 2% will be applicable to PP Ltd, being a smaller and unquoted company. Compute the expected valuation of PP Ltd, if:

(a) The current level of dividend is expected to continue into the foreseeable future.

(b) The dividend is expected to grow at a rate of 4% pa into the foreseeable future.

(c) The dividend is expected to grow at a 3% rate for three years and 2% afterwards.

Reference no: EM132976909

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