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Date Posted: 19:04:11 08/02/00 Wed
Author: Richard Raby
Subject: Question 16 - WACC computation

I calculate dividend price of $1. Current Price using the constant dividend growth of 1.04 equals a current price of 9.45. I then calculate the expected return on equity of 15%. .15*.40 + .08(.60)(.60) = 8.8 % and the answer listed is 7.78. Am I missing something here?

In addition, #15 I am not sure how to figure out as well. How do you take care of the 5.00 one time payment?

Thanks,
Richard Raby

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