Homework Answers
a.
growth rate or g=ROE* plowback ratio
=18%*40%
=7.20%
D1 or dividend in year 1=2.70*(1-40%)=1.62
price sell today=D1/(r-g)
=1.62/(13%-7.20%)
=27.93
b.
price in 3 years=27.93*(1+7.20%)^3=34.41
the above is answer..
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