Given the Following Firm and Market Information,determine the Value of the Firm

question 50

Multiple Choice

Given the following firm and market information,determine the value of the firm. $$\begin{array}{l}\begin{array} { l l r } \text {Net profit margin}&3 \% \\\text {Total asset turnover}&1.5 \\\text {Debt/equity}&0.5 \\\text {Plowback ratio}&0.5 \\\text {Last year's dividends per share}&\$ 2.00 \\\text {Firm beta}&1.2 \\\text {Risk-free rate}&5 \% \\\text {Market risk premium}&8 \%\end{array}\end{array}$$

• A) $28.42
• B) $18.42
• C) $8.42
• D) $38.42
• E) none of these

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Definitions:

Monopolistically Competitive

Refers to a market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and product differentiation.

Long-run Equilibrium

A condition in the market where all firms in an industry are making zero economic profit, and there is an efficient allocation of resources.

Marginal Revenue

The additional income generated from selling one more unit of a product or service.

Marginal Cost

The rise in expense associated with manufacturing an extra unit of a product or service.