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Current year (2015) EPS = $4, Plowback ratio = 0.4, Required return = 12%, Current stock price = $50, Dividend growth rate in the foreseeable
Current year (2015) EPS = $4, Plowback ratio = 0.4, Required return = 12%, Current stock price = $50, Dividend growth rate in the foreseeable future = 5%, estimate the P/E of the company's stock using:
i) Justified/theoretical trailing P/E (2 marks)
ii) Trailing P/E based on market price (2 marks)
iii) Comment on whether the company is currently over-valued, under-valued or fairly valued
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