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How rapidly will the earnings and dividends grow

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Reference no: EM132855860

Question - XYZ Inc. has been reinvesting 60% of earnings into a project that yields a return of 12%. The dividend yield is expected to be 3% next year. The current share price of XYZ Inc. is $120 / share.

(a) If XYZ Inc. can continue to reinvest at this rate and earn 12% on the investment, how rapidly will the earnings and dividends grow? Also, calculate the market required rate of return.

Reference no: EM132855860

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