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X-Tech is a new Internet venture. It's first year dividend is expected to be $30. The risk-adjusted discount rate for this company is 10%. However, the growth prospect of X-Tech is uncertain. Some analysts believe it will grow 4% per year. Another group believe it can grow as fast as 5.5% per year. Calculate the equity value of X-Tech under each of those assumptions. Plot a graph showing the stock value of the company for a range of future growth rates between 3% to 6% (step size of 0.1%) Assume that the growth rate is fixed at 5.5%. However, analysts disagree with each other on the right discount rate to apply for the company. Some believe 8% is correct, but the other group thinks 6% is a more precise value. Plot the stock price of the company as a function of discount rate for the range of 6% to 12% (step size of 0.1%) Now assume that everybody agrees that the growth rate is 5% and discount rate is 7%. However, they believe that the due diligence process of the firm has not been done carefully. There is a range of estimation for the dividend of the first year, which varies between $20 to $100. Plot the stock price as a function of first-year dividends (step size of $5). What difference do you observe compared to the results of parts (1) and (2)? Can you relate what you learn from this question to an important historical event? Explain it

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