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Capitalization rate-growth rate of earnings

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Today is January 1st, 2016. Fabregas, Inc. is projecting earnings per share (EPS) of $4.50 for January 1st, 2017. It plans to pay out 35% of its earnings in dividends, and management is confident that its ROE of 9.0% on new investments can be maintained over a reasonably long horizon.

The expected market return is 6.5%, Fabregas, Inc. has a Beta of 1.2, and the risk-free rate is 0.5%. For Fabregas, Inc. calculate the market capitalization rate, the growth rate of earnings, and today's price and P-E ratio (calculated as the ratio of today's price to expected earnings on January 1st, 2017).

Reference no: EM132528563

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