A company is expected to have return on equity

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A company is expected to have a return on equity of 20% for the next four years. Its current stock price is $20. The company paid $1 in dividends in the most recent year, and had earnings per share of $1.25. If the company maintains its payout ratio, how much will the firm pay out in dividends over the next four years? If the company grows at its sustainable growth rate for the next four years, and than at 3% into perpetuity, is the company correctly valued today? Assume a required rate of return of 10%.

Reference no: EM131880459

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