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A firm has estimated the residual earnings per share of stock for the next three years to be $0.60, $0.65, and 0.70, respectively. The residual
A firm has estimated the residual earnings per share of stock for the next three years to be $0.60, $0.65, and 0.70, respectively. The residual earnings are expected to grow at 6 percent annually forever after year 3. The current book value of equity is $25 per share and the required return on equity is 15%. What should be the current per share value of equity (i.e., the stock price per share in year 0)? A) $47.08 B) $34.72 C) $31.89 D) $6.89
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