Calculate the Discount Rate
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A stock sells for $60. The next dividend will be $3 per share. If the rate of return earned on reinvested funds is a constant 10% and the company reinvests 40% of earnings in the firm, what must be the discount rate? (Do not round intermediate calculations.)
What is current discount rate= ______%
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Solution Summary
This solution illustrates how to compute the discount rate based on the return on investment.
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