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Question
Given the following information for a company in a developing market, estimate the value of the company. The cash for the next year is estimated to be either $200 in the business-as-usual scenario or $50 in the distress scenario. The probabilities of the scenarios are 80 percent and 20 percent, respectively. The expected perpetual growth rate in each case is 5 percent per year, and the cost of capital is 11 percent. The value of the company is closest to:
a) $1,654.55
b) $2,500.00
c) $2,833.33
d) $3,333.33
Answer
This answer is hidden. It contains 121 characters.
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