Our company forecasts that it will pay a $5.00 dividend next year, which represents 100%...
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Our company forecasts that it will pay a $5.00 dividend next year, which represents 100% of its earnings. This will provide investors with a 12% expected return. Instead, we decide to plow back 40% 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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