The discounting approach and reinvestment approach

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Reference no: EM131878597

1. The discounting approach, the reinvestment approach, and the combination approach are three ways to calculate _____.

a) operating cash flows for a project.

b) depreciation using MACRS.

c) the modified internal rate of return.

d) the profitability index

2. Citi Group (C)’s current annual dividend is $4.80 per share, which has been growing at 10 percent each year for the past 3 years. If starting from this year, the dividend growth rate declines linearly to 4% over a 8-year period, and it stays at 4 percent into perpetuity thereafter. Assuming Citi's estimated cost of equity is 12%, please compute the fair price of Citi Group today.

A) $76.80

B) $14.40

C) $48.00

D) $62.40

Reference no: EM131878597

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