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A firm is currently priced per Gordons model. Beta is 1.25, expected rate of return on the market portfolio is 12%, and the risk-free rate

A firm is currently priced per Gordons model. Beta is 1.25, expected rate of return on the market portfolio is 12%, and the risk-free rate of return is 4%. ROE = 15%. Jensens alpha is zero. The firm has retention ratio of 60%. The next years dividend per share D1 is expected to be $1.50. Find the stock price per share.

a.

10

b.

20

c.

40

d.

30

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