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lecimal place.) a) Assume that the market's expectations of future ROE and the discount rate are 22% and 5.5%, respectively. Solve for the implied growth
lecimal place.) a) Assume that the market's expectations of future ROE and the discount rate are 22% and 5.5%, respectively. Solve for the implied growth rate. o) Assume that the market's expectations of future ROE and the growth rate are 22% and 3%, respectively. Solve for the implied discount rate. c) Assume that the market's expectations of the discount rate and the growth rate are 5.5% and 3%, respectively. Solve for the implied future ROE. d) Do the market expectations implied from the results of parts (a) through (c) seem reasonable? The expectations from (a) will be difficult to obtain since the implied growth rate is in residual income, not total income. The expectations from (b) will be difficult to obtain since the implied discount rate is higher than the growth rate. The expectations from (c) will be difficult to obtain since the implied future ROE is lower than past ROE. The expectations for all parts are reasonable and easy to obtain
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