Assume that Company A is in stable growth. Its current earnings are expected to grow 6.6% a year in perpetuity, and its stock has a beta of 0.85. If the current Treasury bond rate is 4%, the current estimate of the market risk premium is 6%, and the stock is trading at a P/E ratio of 9.5, estimate Company A's return on equity. (Hint: use return on equity = net income / shareholders' equity, while solving the question. Express your answer in percentages and round to two decimals).

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The required return on equity of Company A can be calculated using the capital asset pricing model C... View the full answer