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You are valuing a large commercial bank. The bank reported earnings per share of $ 4 last year, and paid out dividends of $2.40 per
You are valuing a large commercial bank. The bank reported earnings per share of $ 4 last year, and paid out dividends of $2.40 per share. The earnings are expected to grow 4% a year in perpetuity, and the firm is expected to maintain its existing payout ratio. The firms cost of equity is 9%.
a- Estimate the value of equity per share.
b- If the stock is trading at $ 42 per share, estimate the implied growth rate (the growth rate that the market is assuming for this stock).
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