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ABC Company generated cash flows of $2.00 per share last year. ABC's cost of capital is 12%. Estimate the value per share of ABC for each of the following sets of assumptions.

A- No future growth is expected.

B- Constant future growth of 6% is expected.

C-Growth of 10% per year is expected for the next three years, followed by constant growth of 6%.

D-Growth is expected to decline from 10% to 6% over the next four years, and then continue at 6%.

E-Growth of 10% per year is expected for the next two years, declining to 6% over the next four years, and then continuing at 6%.

F-Growth is expected to be 12% in year one, 11% in year two, 10% in year three, then decline to 6% over the next four years, and then continue at 6%.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92783124

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