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Question
The risk-free rate of return is 10 percent, and the expected return for the stock market is 16 percent. Evergreen Industries has a beta of 1. 1, and investors expect dividends and earnings to grow at an 8 percent rate per year. The current dividend is $1.20, and the payout ratio is 50 percent.(a)Calculate the P/E ratio for Evergreen Industries.
(b)Estimate the price of the stock for the next year using the multiplier model.
Answer
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