Question: Answer based on the following information: Summary Income Statement in $ Sales5,000,000 EBIT1,000,000 Int. Expense40,000 EBT960,000 Net Income624,000 Other Financial Information in $ Market Value

Answer based on the following information:

Summary Income Statement in $

Sales5,000,000

EBIT1,000,000

Int. Expense40,000

EBT960,000

Net Income624,000

Other Financial Information in $

Market Value of LT Debt500,000

Market Value of Equity4,500,000

Avg. P/E12x

Growth rate "g" = 0.04

a) Calculate required rate of return "r"

b) Calculate intrinsic value.[Assume or substitute Net Income for Cash Flow

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