In 2009, the median price-to-earnings ratio for the S&P 500 was 11.1. If the long-run return on

Question:

In 2009, the median price-to-earnings ratio for the S&P 500 was 11.1. If the long-run return on equity is 13.5 percent and the long-run growth in GDP is expected to be 6.7 percent (3.5 percent real growth and 3.2 percent inflation), what is the real implied by the equity-denominated key value driver formula?
Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...