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The change in the intrinsic value of a firm’s common stock resulting from an increase in ROE most likely:

A depends on the reason for the increase in ROE.

While an increase in a firms ROE due to a sharp increase in earnings will, if unexpected, lead to an increase in the intrinsic value of its shares, an increase in a firm’s ROE due to the repurchase of stock with debt will not necessarily increase the intrinsic value of the firms shares, as any increase in ROE may be offset by an increase in the risk inherent in the firms shares.

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