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44. According to the Fisher Equation, given an expected inflation rate of 1.5% and a nominal interest rate of 4.5%, the approximate real interest rate

44. According to the Fisher Equation, given an expected inflation rate of 1.5% and a nominal interest rate of 4.5%, the approximate real interest rate is:

Multiple Choice

  • 3.0%

  • 1.5%

  • 4.5%

  • 6.0%

Company A is growing quickly, with current annual increases of 15% per year in both sales and net income. To fund its growth, it is reinvesting all of its net income each year in new productive opportunities (payout ratio = 0). Yesterday, the firm reported net income of $3.00 per share. This growth is expected to last for another five years (to the end of year 5 on the timeline), at which time they will have exploited most of the available high growth opportunities. The growth rate in net income will then fall to 7% and the firm will adopt a payout ratio of 50% with the first dividend paid at time period 6.

If shareholders require a 17% return to hold the firms shares, how much would you expect each share to sell for today?

Multiple Choice

  • $15.28

  • $11.12

  • $16.32

  • $14.72

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