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Assume that the dividend payout ratio will be 55 percent when the rate on long- term government bonds falls to 9 percent. Since investors are

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Assume that the dividend payout ratio will be 55 percent when the rate on long- term government bonds falls to 9 percent. Since investors are becoming more risk averse, the equity risk premium will rise to 8 percent and investors will require a 7 percent return. The return on equity will be 13 percent. Compute the expectation of the market price-earning (P/E) ratio

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