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Question 16 2 pts Bilbo Inc. is expected to maintain its dividend payout ratio of...

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Question 16 2 pts Bilbo Inc. is expected to maintain its dividend payout ratio of 80% in the long term. The earnings per share (EPS) of the company are expected to be $0.5 next year. Earnings are expected to grow at a constant rate of 4% per year, in perpetuity. The current risk-free rate is 2%, the implied equity risk premium is 6.0%, and the estimated beta of the firm is 1.0. If the firm is currently trading in the market at a price-to-earnings ratio (P/E) of 20, which of the following statements is more likely to be correct: Bilbo is overvalued O Bilbo is undervalued Bilbo is fairly priced Previous Next

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