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Exam (elaborations) HernandezA-FINC300-7.xlsx
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(a) What are the values for divisions A and B if you assume, for calculation purposes, that operating income is constant to perpetuity? V A = 50/0.15 = 333.3 V B = 300/0.15 = 2000 (b) The company pays out 50 and so finances its investments for 300. The company invests everything in division B at the same return on capital employed (30%). How much value is created? V A unchanged V B = 390/0.15 = 2600 for 300 reinvested creation of value = 300
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HernandezA-FINC300-7.xlsx
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