(1) What is the estimated cost of equity using the discounted cash flow (DCF) approach? (2) Suppose...
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(1) What is the estimated cost of equity using the discounted cash flow (DCF) approach?
(2) Suppose the firm has historically earned 15% on equity (ROE) and has paid out 62% of earnings, and suppose investors expect similar values to obtain in the future. How could you use this information to estimate the future dividend growth rate, and what growth rate would you get? Is this consistent with the 5.8% growth rate given earlier?
(3) Could the DCF method be applied if the growth rate were not constant? How?
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Related Book For 
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
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