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ABC Enterprises expects earnings next year of $5 per share and has a 40% retention rate, which it plans to keep constant. Its equity cost
ABC Enterprises expects earnings next year of $5 per share and has a 40% retention rate, which it plans to keep constant. Its equity cost of capital is 15%, which is also its expected return on new investment. Its earnings are expected to grow forever at a rate of 6% per year. If its next dividend is due in one year, what do you estimate the firms current stock price to be? Explain and check your answer.
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