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What is the rate the growth rate

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Question - The risk free rate of return is 3%, the expected rate of return on the market portfolio is 8%, and the stock Estline Corporation has a beta coefficient of 0.8. Estline pays out 50% of its earnings in dividends, and earnings in one year are expected to be $5/share. Dividends are paid annually. The most recent dividend was just paid and its effects are already included in the stock price. The price of Estline in the market is $50/share. What is the rate the growth rate (i.e., dividends grow at this rate forever) implied by the current market price of Estline?

Reference no: EM132788094

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