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5. Next year, NPI expects net income of $16 million. Its plans to reinvest 0.5 of its earnings and pay out the 0.5 as dividends. Its cost of equity capital of 12%. If NPI earns a 16% rate of return on the funds reinvested, what is the growth rate and value of NPI? Hypothetically, had the firm not reinvested any of its earnings and paid out 100% of earnings as dividends, what would have been the value? How much does reinvesting contribute to firm value?

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