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(a)XYZ corp has a stable dividend payout ratio of 40%. Last year EPS was $5.20. It expects ROE of 8% in the future. k=9%. Calculate
(a)XYZ corp has a stable dividend payout ratio of 40%. Last year EPS was $5.20. It expects ROE of 8% in the future. k=9%. Calculate the target price of the stock. (b) Sugar Cola companys latest annual dividend of $2.50 was paid yesterday. You believe the growth rate will be between 5% and 5.5% forever. Your required rate of return is 9%. If the stock is currently selling for $71, what should be you investment recommendation? Show all work.
(a)XYZ corp has a stable dividend payout ratio of 40%. Last year EPS was $5.20. It expects ROE of 8% in the future. k=9%. Calculate the target price of the stock. (b) Sugar Cola companys latest annual dividend of $2.50 was paid yesterday. You believe the growth rate will be between 5% and 5.5% forever. Your required rate of return is 9%. If the stock is currently selling for $71, what should be you investment recommendation? Show all work.
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