Assume in the previous question with Vernon Enterprises that the firm will earn a return on capital

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Assume in the previous question with Vernon Enterprises that the firm will earn a return on capital of 15% in perpetuity.

a. Assume that the firm is instable growth, growing 5% a year forever; estimate the firm’s reinvestment rate.

b. Given this reinvestment rate, estimate the value of the firm.

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Applied Corporate Finance

ISBN: 978-1118808931

4th edition

Authors: Aswath Damodaran

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Question Posted: Apr 15, 2015 09:02 AM

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Assume in the previous question with Vernon Enterprises that the firm will earn a return on capital

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Applied Corporate Finance

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