You are analysing the performance of a UK based company. You are given the following...
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Finance
You are analysing the performance of a UK based company. You are given the following information relating to the company's financial statements: Net profit: 500 million Number of ordinary shares: 80 million You are also provided with the following relevant information to help analyse the company: Quoted share price: 2 P/E ratio (forward): 15 Variance of returns on London Stock Exchange: 0.5 The covariance of the company's stock returns with the returns of London Stock Exchange: 0.98 Annual rate of return on UK risk-free treasury stock: 4.0% Anticipated annual return on entire UK stock market: 6.0% Required: (a) Calculate the expected earnings growth rate of the company using the information above (b) Calculate Company's cost of equity
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