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A $600 000 B

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From the following data, calculate the total market value of the firm (assume these value are constant forever).

Question

From the following data, calculate the total market value of the firm (assume these value are constant forever).

Earnings before interest = $0.1 million, D = $0.2 million, interest on debt = 10% p.a., cost of equity capital = 20%, the dividend payout ratio = 0.5, and assume no taxes.

A. $600,000

B. $500,000

C. $473,684

D. $400,000

E. $200,000

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