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2. A firm with a book value of $15.60 per share and 100% dividend payout is expected to have a ROE of 15% forever. Its

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2. A firm with a book value of $15.60 per share and 100% dividend payout is expected to have a ROE of 15% forever. Its cost of equity capital is 10%. Calculate its market value of equity using the AE model. RIM = NI - (equity x cost of equity) ROE = NI/Equity NI = ROE * Equity NI = 15% x 15.60 = $2.34

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