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5. Constant-growth rates One of the most important components of stock valuation is a firms estimated growth rate. Financial

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growth rate=retention rate*Return on equity

retention rate= 1-payout rate

return on equity=netincome/equity

In this question

dividend payout is 45% that is 0.45 so retention rate is 55% or 0.55

from net income and equity value frm question return on equity is 0.12777

so growth rate is 0.55*0.12777=0.0702=7.02%

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