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Assume a zero-growth rate for earnings and dividends in each situation below.Also assume that all earnings are paid out as dividends and that the earnings-based valuation model is being used.
Situation 1: Das Company's earnings are expected to be $9 per share and its stock price is $36.What is the required rate of return on the firm's equity?
Situation 2: South Company's earnings are expected to be $6 per share and its required rate of return on equity is 26%.What is the current price of the stock?
Situation 3: Jones Company's current stock price is $60 and its required rate of return on equity is 15%.What is the firm's expected earnings?
Past Oriented
A perspective or approach that places emphasis on traditions, history, and values from the past in decision making and lifestyle.
Retributivist
A philosophy of punishment where the focus is on the offender receiving a punishment proportional to the crime committed, based on the principle of just desert.
Utilitarian
A philosophical approach that emphasizes the greatest good for the greatest number of people as the primary consideration in decision making.
Future
The period of time that will come after the present, which has yet to occur and is unknown.
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