Question: In 2009 the median price to earnings ratio for the S P 500
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 cost of equity implied by the equity-denominated key value driver formula?
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