(Answered) From the constant-growth model the amount of

Management Studies

From the constant-growth model, the amount of internally-funded growth is 12.5% and a maximum P/E ratio of 20 would be paid for Merck under these circumstances. Growth at a reasonable-price investors normally consider a PEG ratio of 1 to be the maximum appropriate valuation for a growth stock, so MRK is not apt to appeal to GARP investors:

In the solution, where does the 12.5% come from?

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