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Mad Rock plc is a company that sells mp3 music online It is expected to generate earnings of 1 per share this year after its Web site is upgraded and online marketing is stepped up Given the

Mad Rock plc is a company that sells mp3 music online. It is expected to generate 
earnings of €1 per share this year after its Web site is upgraded and online marketing 
is stepped up. Given the popularity of iPod and other mp3 players, the share price of 
Mad Rock has rocketed from €8 to €95 per share in the past 12 months. The cost of 
capital for the company is 18 per cent. Of course, the future of a young Internet 
company such as Mad Rock is highly uncertain. Nevertheless, using the very limited 
information provided in this problem, do you think €95 could be a fair price for its 
shares? Support your argument with a simple analysis. 

Apr 16 2021 View more View Less

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