ABC trades for $30, has current earnings of $4, current dividends of $2, and a beta of 1.2. The risk-free rate is 6% and the market risk premium is 5%. What is the ROE implied by the DDM? ROE = ___% (answer the closest integer, without % sign)

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 3P: Suppose that the risk-free rate is 5% and that the market risk premium is 7%. What is the required...
Question

ABC trades for $30, has current earnings of $4, current dividends of $2, and a beta of 1.2. The risk-free rate is 6% and the market risk premium is 5%.

What is the ROE implied by the DDM?

ROE = ___% (answer the closest integer, without % sign)

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