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A company forecasts to pay a 3.00 dividend next year, which represents 100% of its earnings. This will provide investors with a 10% expected return.
A company forecasts to pay a 3.00 dividend next year, which
represents 100% of its earnings. This will provide investors
with a 10% expected return. Instead, we decide to plow back
30% of the earnings at the firms current return on equity of
15%. What is the value of the stock before and after the
plowback decision?
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