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Discrete Discs Inc.manufactures hard disk drives for personal computers.Discrete is an all equity firm.At the end of the current year,the CFO expects EBIT to be $10M and the same earnings are expected annually in perpetuity.The company is not growing so CAPEX and investments in net working capital are zero.The cost of equity for Discrete is 8%.Solid State Storage Inc.is identical to Discrete except that it has $3M of long term debt outstanding.What is the value of Solid State's equity? The corporate tax rate is 30%.
Predicted
Anticipated or expected based on current trends or data analysis.
Internal Growth Rate
The maximum rate at which a firm can expand its operations without obtaining additional financing, driven by reinvestment of its earnings.
Plowback Ratio
A financial metric that measures the proportion of earnings retained by a company after dividends have been paid out to shareholders.
Dividend Payout
The fraction of a firm's earnings allocated to its shareholders through dividends.
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