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Estimate of the price of the company stock

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Question - Suppose that the consensus forecast of security analysts of your favourite company is that earnings next year will be $5.00 per share. The company plows back 50% of its earnings and if the Chief Financial Officer estimates that the company's return on equity is 16%. Assuming the plowback ratio and the ROE are expected to remain constant forever: If you believe that the company's required rate of return is 10%, what is your estimate of the price of the company's stock?

Reference no: EM132855317

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