Question: Problem 7 - 2 6 Valuing Businesses ( LO 3 ) Start - Up Industries is a new firm that has raised $ 3 2

Problem 7-26 Valuing Businesses (LO3)
Start-Up Industries is a new firm that has raised $320 million by selling shares of stock.Management plans to earn a 20% rate of return on equity, which is more than the 12% rate of return available on comparable-risk investments. Half of all earnings will be reinvested in the firm.
What will be Start-Ups ratio of market value to book value?
Note: Do not round intermediate calculations.
What will be Start-Ups ratio of market value to book value if the firm can earn only a rate of return of 4% on its investments?
Note: Do not round intermediate calculations. Round your answer to 1 decimal place.

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