Do think that overpaid or underpaid

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NELMA Corporation reported a book value for its 567.20 million common shares of $8,508 million on December 31, 2019. Analysts are forecasting EPS of $3.00 for 2020, $3.50 for 2021, $4.00 for 2022, and $4.25 for 2023. The indicated Retention Ratio is 60%.

NELMA Corporation has debt of $100,000, equity of $150,000, a leveraged value of $100,000, a cost of debt of 5%, a cost of equity of 10%, and a tax rate of 40%. Analysts are predicting the residual earnings to grow at 4% after 2023.

Required:

Question 1: If you paid $68.02 per share at the beginning of 2020, do you think that you overpaid or underpaid? Explain and show calculations.

Reference no: EM132545054

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