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10-13. (Valuing common stock) Assume the following: The investor's required rate of return is 13.5 percent. The expected level of earnings at the end of

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10-13. (Valuing common stock) Assume the following: The investor's required rate of return is 13.5 percent. The expected level of earnings at the end of this year (El) is $6.00. The retention ratio is 50 percent. The return on equity (ROE) is 15 percent (that is, it can earn 15 percent on rein- vested earnings). Similar shares of stock sell at multiples of 16.667 times earnings per share. a. Determine the expected growth rate for dividends. b. Determine the price/earnings ratio (P/E) using Equation (10-5a). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model

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