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Hello students, here is a question.
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The brumby growth opportunities, the annual earning of brumby limited will be $6 per share in perpetuity in the firm makes new investment.
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Under such situation, the firm would pay all the earnings as dividend.
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Assume the first dividend will be sent to shareholders exactly one year from now.
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Alternatively, assume that three years from now and is every subsequent year is perpetually the company can invest 25 % of earning in the new project.
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Each project will earn 20 % of an year in perpetuality.
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The firm discount rate is 12%.
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So, our question is what is the price share of brumby limited stock today without the company making a new investment? so, this is our question.
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Let us discuss the answer for this.
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So, the price share of brumby limited will be price share is estimated follow given that will discount rate discount rate is 12 % and the absence of growth anticipated...