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Question: Dividend Displacement and Value (Medium) Two firms, A and B, which have very similar operations, have the same book value of $100 at the end of 2012 and their cost of capital is 11 percent. Both are forecast to have earnings of $16.60 in 2013. Firm A, which has 60 percent dividend payout, is forecast to have earnings of$17.80 in 2014. Firm B has zero payout.

a. What is your best estimate of firm B earnings for 2014?

b. Would you pay more, less, or the same for firm B relative to firm A in 2012?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92296627

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