What is the projected growth rate for the 10-year period?

QUESTION 2: If your required return on investment is 12%, how much will be the INTRINSIC Value of U-GANDA Corporation?

QUESTION 3: If your required return on investment is 12%, would you purchase the shares of U-GANDA Corporation? Substantiate your answer.

 

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You are evaluating U-GANDA Corporation based on the following projected cash flows for the next 10 years: Year 1 2 3 4 5 Cash flows 1,000,000 1,000,000 1,150,000 1,200,000 1,200,000 Year 6 7 8 9 10 Cash flows 1,300,000 1,500,000 1,700,000 2,000,000 2,200,000 After year 10, the cash flows are expected to grow at a rate based on the 10-year period. The company have 1 million outstanding shares and is currently selling on the stock market at P30 per share. The company's outstanding debts amounted to P3,000,000. You are evaluating U-GANDA Corporation based on the following projected cash flows for the next 10 years: Year 1 2 3 4 5 Cash flows 1,000,000 1,000,000 1,150,000 1,200,000 1,200,000 Year 6 7 8 9 10 Cash flows 1,300,000 1,500,000 1,700,000 2,000,000 2,200,000 After year 10, the cash flows are expected to grow at a rate based on the 10-year period. The company have 1 million outstanding shares and is currently selling on the stock market at P30 per share. The company's outstanding debts amounted to P3,000,000.

Answer rating: 100% (QA)

To calculate the projected growth rate for the 10year period we can use the formula for the compound annual growth rate CAGR The CAGR is calculated as ... View the full answer