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Find the intrinsic value of the firm

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Reference no: EM133070819

Assume that the constant growth model satisfies the stock pricing process. Consider the following information on ABC Inc.:

Expected EPS: $3.00; Return on assets: 25%

Net profit margin: 15%; Dividend payout ratio: 40%

Debt to equity ratio: 0.6; Tax burden: 20%

Beta: 2.0; T-bill rate: 2%

Expected return on the market portfolio: 19%

(a) Find the intrinsic value of the firm. k=0.25+2*

(b) Find the required rate of return on ABC Inc. if the firm has no potential for growth?

Reference no: EM133070819

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