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A firm has expected earnings of $1.25 per share and a market capitalization rate of 11%. Earnings are expected to grow at 6% per year

A firm has expected earnings of $1.25 per share and a market capitalization rate of 11%. Earnings are expected to grow at 6% per year indefinitely. The firm has a 50% plowback ratio. By how much does the firm's ROE exceed the market capitalization rate?

A.

0.5%
B.

2%
C.

1.5%
D.

1%

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