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Estimate of the value of a share of the firm

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Linkedina has a ROE of 20% that is expected to stay like that for years 1 to 3. In year 4 the ROE is expected to change to 12% (for both new and old projects) and stay there forever. The firm's stock has just paid a dividend of 3 AUD and the retention ratio is 25%. Assume the retention ratio is held constant forever and the opportunity cost of equity capital is 14%. What is your estimate of the value of a share of the firm? Choose the closest number unless you think it cannot be determined.

Reference no: EM132481150

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