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Asked Dec 4, 2019
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a. MF Corp. has an ROE of 12% and a plowback ratio of 50%. If the coming year's
earnings are expected to be $2 per share, at what price will the stock sell? The
market capitalization rate is 11%. (Do not round intermediate calculations. Round
your answer to 2 decimal places.)
Price
b. What price do you expect MF shares to sell for in three years? (Do not round
intermediate calculations. Round your answer to 2 decimal places.)
Price
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a. MF Corp. has an ROE of 12% and a plowback ratio of 50%. If the coming year's earnings are expected to be $2 per share, at what price will the stock sell? The market capitalization rate is 11%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price b. What price do you expect MF shares to sell for in three years? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price

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Expert Answer

Step 1

The stock price generally refers to the current price of the stock at which these stocks are traded in the market.

Step 2

Given Information:

Return on equity (ROE) = 12%

Plowback ratio = 50%

Expected earning per share = $2

Market capitalization rate = 11%

Step 3

(a)

Formulas used to calculat...

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Expected dividend (1) Price of stock = - Market capitalization rate - Growth rate (2) Expected dividend = EPS x Dividend payout ratio (3) Dividend payout ratio 1- Plowback ratio (4) Growth rate = ROE x Plowback ratio

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