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A firm with return on equity 20% and beta 0.9 just distributed all its earnings ($12 per share) as dividends. The expected market return is

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A firm with return on equity 20% and beta 0.9 just distributed all its earnings (\$12 per share) as dividends. The expected market return is 15% and the riskfree rate is 5%. The firm can keep distributing all its earnings to shareholders each year or retain 25% for reinvestment

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