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In earnings capitalization model and discounted cash flow model, the cost of equity is used as a discount rate to estimate firm's value. PE is
In earnings capitalization model and discounted cash flow model, the cost of equity is used as a discount rate to estimate firm's value. PE is one of the indicator of showing firm's growth opportunity. Also it is used to estimate the cost of equity, which is the minimum rate of return that investors expect from this firm in the market. If PE is 77, what is the cost of equity estimated using PE? Is this cost of equity reasonable? Please discuss.
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