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Exercise

ABy Admin
Dec 04'23

Answer

The value of company ABC is the PV of the growing annuity of cash flow:

PV = 10/(1.09−1.05) = $250 million.

References

Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.

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