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An all-equity financed company distributes 80% of its earnings each year and reinvests the balance. The return on its projects is a constant 15% per annum. If the company's current market capitalisation is $1.5m and its earnings are $125,000, what is the required rate of return for the ordinary shareholder? A. 9.9% B. 9.6% C. 19.5% D. 18.7% |