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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

image text in transcribed 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 risk-free rate is 5%. The firm can keep distributing all its earnings to shareholders each year or retain 25% for reinvestment. What is the price of the stock if the firm decides to retain 25% of its earnings each year moving forward? a. $60 b. $133.3 c. $80 d. $90 e. $100 f. $105

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