Calculate the expected earnings growth rate

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Stock ABC has a Return on Equity of 9% and pays out 75% of its earnings in the form of a dividend to shareholders. Stock ABC recently paid a dividend of $2.00 per share and has a beta of 1.5. Assume an equity risk premium of 5.5% and a risk free rate of 3%.

a. Calculate the expected earnings growth rate.

b. Calculate the cost of equity.

c. Calculate the intrinsic value of Stock ABC using the constant growth dividend discount model.

Reference no: EM131965793

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