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a)$ 74.6 b)$ 85.6 c)$ 69.8 d)$ 80.1 e)$ 79.4 Company Q's current return on equity (ROE) is 16%. It pays out 60 percent of
a)$ 74.6
b)$ 85.6
c)$ 69.8
d)$ 80.1
e)$ 79.4
Company Q's current return on equity (ROE) is 16%. It pays out 60 percent of earnings as cash dividends (payout ratio = 0.60). Current book value per share is $62. Book value per share will grow as Q reinvests earnings. Assume that the ROE and payout ratio stay constant for the next three years. After that, competition forces ROE down to 12.5% and the payout ratio increases to 0.70. The cost of capital is 12.5%. What is Q's stock worth per shareStep by Step Solution
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