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can you answer all of the question please and thank you A-F :) (Common stock valuation) Assume the following: - the investor's required rate of
can you answer all of the question please and thank you A-F :)
(Common stock valuation) Assume the following: - the investor's required rate of return is 15 percent, - the expected level of eamings at the end of this year (E1) is $7, - the retention ratio is 60 percent, - the retum on equity ( ROE ) is 16 percent (that is, it can earn 16 percent on reinvested earnings), and - similar shares of stock sell at multiples of 7.407 times earnings per share. Questions: a. Determine the expected growth rate for dividends. b. Determine the price earnings ratio (P/E1). c. What is the stock price using the P/E ratio valuation method? d. What is the stock price using the dividend discount model? e. What would happen to the P/E ratio (P/E1) and stock price if the firm could earn 21 percent on reinvested earnings (ROE)? f. What does this tell you about the relationship between the rate the firm can eam on reinvested earnings and P/E ratios? a. What is the expected growth rate for dividends? \% (Round to two decimal places.) Step by Step Solution
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