Expected returns for different growth rates easy a firm, Finance Basics

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Expected returns for different growth rates easy a firm

Question: Expected Returns for Different Growth Rates (Easy) A firm whose shares are trading at 2.2 times book value is forecasted to earn a return on book value of 15 percent next year. Calculate the expected return to buying this stock for the following forecasts of residual earnings growth after the forward year: 3 percent, 4 percent, and 6 percent. What is the expected return if no growth is expected?

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