Company ABC forecasts to have an earning per share of $8 next year. If the...
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Company ABC forecasts to have an earning per share of $8 next year. If the company distributes all its earnings to shareholders as dividends, it will provide investors with a 10% expected return. Instead, company ABC decides to plowback 35% of the earnings at the firms current return on equity of 20%. What is the value of the stock before and after the plowback decision?
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