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Suppose a firm has an expected ROE of 10%. The firm reinvests 75% of its earnings.

a. What is its growth rate?

b. Assume this firm pays a current dividend of $4.25. You expected to sell the stock at the end of 3 years for $85. The risk free rate is 6.5%, the market risk premium of 7%, and the firm’s beta is .8. Using the specified holding period model, calculate the value of this stock.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M91406061

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