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A particular company currently has sales of​ $250 million; sales are expected to grow by​ 20%...

A particular company currently has sales of​ $250 million; sales are expected to grow by​ 20% next year​ (year 1). For the year after next​ (year 2), the growth rate in sales is expected to equal​ 10%. Over each of the next 2​ years, the company is expected to have a net profit margin of​ 8% and a payout ratio of 57​%, and to maintain the common stock outstanding at 16.18 million shares. The stock always trades at a​ P/E of 13.98 times​ earnings, and the investor has a required rate of return of 22​%. Given this​ information:

a. Find the​ stock's intrinsic value​ (its justified​ price).

b. Use the IRR approach to determine the​ stock's expected​ return, given that it is currently trading at ​$12.67 per share.

c. Find the holding period returns for this stock for year 1 and for year 2.

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