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Shunichi Kobayashi is valuing United Parcel Service (NYSE: UPS). Kobayashi has made the following assumptions:...

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Finance

Shunichi Kobayashi is valuing United Parcel Service (NYSE: UPS). Kobayashi has made the following assumptions:

Book value per share is estimated at $9.62 on 31 December 2007. EPS will be 22 percent of the beginning book value per share for the next eight years.

Cash dividends paid will be 30 percent of EPS.

At the end of the eight-year period, the market price per share will be three times the book value per share.

The beta for UPS is 0.60, the risk-free rate is 5.00 percent, and the equity risk pre- mium is 5.50 percent. The current market price of UPS is $59.38, which indicates a current P/B of 6.2.

Whats the Intrinsic Value of UPS stock when the RI in Year 8 persists with =0.8?

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