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Net income for the previous year was $400,000, of which $260,000 was paid out in dividends. Dividends are expected to grow at a constant rate.

Net income for the previous year was $400,000, of which $260,000 was paid out in dividends. Dividends are expected to grow at a constant rate. The company has 200,000 shares outstanding and the book value of equity is $3,000,000. The appropriate P/E ratio for this type of company is 15.

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