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Estimate company as return on equity

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Question - Assume that Company A is in stable growth. Its current earnings are expected to grow 6.4% a year in perpetuity, and its stock has a beta of 0.85. If the current Treasury bond rate is 4%, the current estimate of the market risk premium is 6%, and the stock is trading at a P/E ratio of 9.5, estimate Company A's RETURN ON EQUITY (ROE). CAPM is 9.1%.

Reference no: EM132820911

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