Growing at sustainable growth rate

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Reference no: EM131970011

Comapny XYZ is growing at a sustainable growth rate of 4% but they are not sure if this is the best route. The Cost of equity is 13%, ROE is 8%, and EPS is 8. At 6% growth rate their payout rate is .25, reinvestment rate is .75, dividend is 2, and stock value is 28.57. At 4% growth rate their payout rate is .5, reinvestment rate is .5, dividend is 4, and stock value is 44.4. At 0% growth rate their payout rate is .1, reinvestment rate is 0, dividend is 8, and stock value is 61.54.

a) What is their value in growth ($) if they kept growing at 4% per year?

Please show work and explain.

Reference no: EM131970011

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