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1 a) Rf=1%, E[RM]=6%. Company XYZ has CAPM beta of 0.8, ROE of 8% and retains 1/3 of its earnings. Expected earnings per share next
1 a)
Rf=1%, E[RM]=6%. Company XYZ has CAPM beta of 0.8, ROE of 8% and retains 1/3 of its earnings. Expected earnings per share next year are $5.
What is the value of XYZ? (Round to two decimal places). Please show all steps
b) Should XYZ increase or decrease or keep constant the rate at which it retains its earnings? Why?
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