Yield the same value for equity

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Reference no: EM131818165

Alcortal expects to generate annual earnings of $50 million in perpetuity. The company has a payout ratio of 90% and a cost of equity of 12%. The corporate tax rate is 30% and shareholders fully utilise franking credits. Show that the two valuation methods proposed by Officer (1994) yield the same value for equity.

Reference no: EM131818165

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