Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $5, all of which was reinvested in the company.
The firm’s expected
investments is expected to fall to 15% per year. GG’s market capitalization rate is 15% per year.
a. What is your estimate of GG’s intrinsic value per share?
b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year?
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