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ABC Corp. has an ROE of 7% and reinvests 40% of its net income. ABC has just paid an annual dividend of $0.28. ABC stock

ABC Corp. has an ROE of 7% and reinvests 40% of its net income. ABC has just paid an annual dividend of $0.28.

ABC stock has a beta of 0.5. The risk-free rate is 3.9% and the expected return on the market portfolio is 8%.

What is the appropriate discount rate?

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