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What is the required rate of return on the firms equity

task: In each of the following situations assume a zero-growth rate for earnings and dividends (NPVGO is zero), that all earnings are paid out as dividends, and that the earnings-based valuation model is being used.

Problem 1. Dennison Corporation's earnings are expected to be $7.00 per share and its stock price is $28.00. What is the required rate of return on the firm's equity?

Problem 2. Sampson Corporation's ernings are expected to be $5.00 per share and its required rate of return on equity is 22%. What is the current price of the stock?

Problem 3. Johnson Corporation's current stock price is $40.00 and its required rate of return on equity is 15%. What is the firm's expected earnings?

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## Q : What is the cost of equity from retained earnings

D0 = $0.80; P0 = $77.50; and g = 8.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings?