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Question: a pharmaceutical company has a cost of equity of 96...

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A pharmaceutical company has a cost of equity of 9.6%.  In 2020 its ROE was 12.6% and the company expects this to remain constant over the next 14 years, at which point its patents will expire, and its ROE will decline towards its cost of equity with a persistence factor of 0.4.  It's expected book value 14 years from now is $633.  What is the terminal value of the residual income from 2034 onwards, as at 2034.

 

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