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( 2 ) Suppose the firm has historically earned 1 5 % on equity ( ROE ) and paid 6 2 % of earnings, and
Suppose the firm has historically earned on equity ROE and paid of earnings, and suppose investors expect similar values to obtain in the future. How could you use this information to estimate the future dividend growth rate, and what growth rate would you get? Is this consistent with the growth rate given earlier?
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