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A stock market index was equal to 1170 in early 2017. The stocks traded at 2.4 times book value. In 2016, the stocks in the
A stock market index was equal to 1170 in early 2017. The stocks traded at 2.4 times book value. In 2016, the stocks in the index earned a weighted average return on their common equity of 18%. Use a required rate of return of 10% for this portfolio. a) Calculate the residual earnings growth rate the market is forecasting for these stocks. b) Suppose you forecast that a return on common equity of 18% will be sustained in the future
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