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How much would pay for novellino company

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Reference no: EM132560141

You have been reading about the Novellino Company, which currently retains 90% of its earnings (?5 a share this year). It earns an ROE of almost 30%.

Question a. Assuming a required rate of return of 14%, how much would you pay for Novellino Company on the basis of the earnings multiplier model? Discuss your answer.

Question b. What would you pay for Novellino Company if its retention rate were 60% and its ROE were 19%? Show your work.

Reference no: EM132560141

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