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    Constant-Growth Model: Compute the discount rate

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    A Stock sells for $40. The next dividend will be $4 per share. If the rate of return earned on reinvested funds is 15 percent and the company reinvest 40 percent of earnings in the firm, what must be the discount rate?

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    Constant-Growth Model

    A Stock sells for $40. The next dividend will be $4 per ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what must be the discount rate.

    $2.19

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