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Compute grant corp expected continuing value

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Reference no: EM132877438

At the beginning of 2017, investors had invested $25,000 of common equity in Grant Corp. and expect to earn a return of 11% per year. In addition, investors expect Grant Corp. to pay out 100% of income in dividends each year.

Forecasts of Grant's net income are as follows:

2017: $3,500

2018: $3,200

2019: $2,900

2020 and beyond: $2,750 (no growth)

Problem 1: Use this information to compute Grant Corp.'s expected continuing value, based on expected residual income in the year 2020 and beyond.

a. $0
b. $150
c. $2,900
d. $25,000

Reference no: EM132877438

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