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What is the intrinsic value of abc stock

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Reference no: EM132770208

Problem 1: The risk free rate of return is 5 percent, the market risk premium is 10 percent, and the stock of ABC has beta of 1.5. Last year, ABC earned $10 per share in earnings and 70 percent of earnings were retained by the firm - the remaining amount was paid out as dividends. Dividends are expected to grow by 2 percent. What's the intrinsic value of ABC's stock?

a. $15,6

b. $17.0

c. $6.4

d. $18.6

Problem 2: Which of the problems listed below is related to IRR:

a. reinvestment horizon may be inadequate

b. no relation between NPV and IRR

c. Multiple IRRs

d. a negative relationship between NPV and IRR

Reference no: EM132770208

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