Exercise 2: Implied growth rate A stock index stands at 2000 at the end of the year. Next year's earnings for the firms

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Exercise 2 Implied Growth Rate A Stock Index Stands At 2000 At The End Of The Year Next Year S Earnings For The Firms 1 (96.82 KiB) Viewed 44 times

Exercise 2: Implied growth rate A stock index stands at 2000 at the end of the year. Next year's earnings for the firms included in the index are forecasted to be 170. The current book value of equity for the same firms is 1750. Use a required rate of return of 9% and compute the long-term growth rate implied by the index level. You can assume that the long-term growth rate is constant from next year and onwards.