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What will be start-up ratio of market value to book value

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Reference no: EM133035107

Problem - Valuing Businesses - Start-Up Industries is a new firm that has raised $290 million by selling shares of stock. Management plans to earn a 20% rate of return on equity, which is more than the 12% rate of return available on comparable-risk investments. Half of all earnings will be reinvested in the firm.

a. What will be Start-Up's ratio of market value to book value?

b. What will be Start-Up's ratio of market value to book value if the firm can earn only a rate of return of 8% on its investments?

Reference no: EM133035107

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