| Principles of Finance |
Assume today is 31 December 2021. Firm a is expected to adopt the following payout policy for the next 4 years:
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The estimated net profit after tax is $50 million for the year 2025. The company has no preference share financing and does not plan to do so for the next 4 years. The expected price-earnings ratio by the end of the year 2025 is 15 times. Shareholders of Firm A require a return of 10 percent for shares in this risk class.
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