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    ABCO: Estimate the P/E ratio and required rate of return

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    Abco corporation anticipates a 10 percent growth in net income and dividends. Next year, the company expects earnings per share of $5 and dividend per share of $4. Abco will be having its first public issuance of common stock. The stock will be issued at $40 per share?

    a) What is P/E Ratio?
    b) What is required rate of return on the stock?

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    Solution Preview

    Market price per share=$40
    Earning per share=$5

    PE Ratio=Market ...

    Solution Summary

    Solution depicts the steps to estimate the P/E Ratio and required rate of return in the example case of ABCO.