An analyst gathered the following information about a company and the market: Using the discounted cash flow

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An analyst gathered the following information about a company and the market:

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Using the discounted cash flow (DCF) approach, the cost of retained earnings for the company is closest to:
A. 15.7%.
B. 16.1%.
C. 16.8%.

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Corporate Finance A Practical Approach

ISBN: 9781118217290

2nd Edition

Authors: Michelle R Clayman, Martin S Fridson, George H Troughton, Matthew Scanlan

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Question Posted: Mar 29, 2024 12:00 AM

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An analyst gathered the following information about a company and the market: Using the discounted cash flow

Question:

Current market price per share of common stock $28.00 Most recent dividend per share paid on common stock (Do) $2.00 Expected dividend payout rate 40% Expected return on equity (ROE) 15% Beta for the common stock Expected rate of return on the market portfolio Risk-free rate of return 1.3. 13% 4%

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Based on the Capital Asset Pricing Model CAPM the cost of retained earnings for the company is close...View the full answer

Corporate Finance A Practical Approach

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