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Calculating the expected return on equity

What return on equity do investors expect for a firm with a $17 stock price, a dividend in year one of $2.00, a beta of 1.6, and a constant growth rate of 2%?

1. 13.76%
2. 26.00%
3. 11.75%
4. 16.33%
5. 17.21%

Solution Summary

Solution determines the expected return on equity in the given case.

$2.19