KFS has two divisions. Both have current sales of $1,000, current expected growth of 5%, and a

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KFS has two divisions. Both have current sales of $1,000, current expected growth of 5%, and a WACC of 10%. Division A has high profitability (OP = 6%) but high capital requirements (CR = 78%). Division B has low profitability (OP = 4%) but low capital requirements (CR = 27%). Given the current growth rate of 5%, determine the intrinsic MVA of each division. What is the intrinsic MVA of each division if growth is instead 6%?

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Corporate Finance A Focused Approach

ISBN: 978-1439078082

4th Edition

Authors: Michael C. Ehrhardt, Eugene F. Brigham

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