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Business, 28.02.2020 00:58 ellemarshall13

Suppose that instead of plowing money back into lucrative ventures, Aqua America’s management is investing at an expected return on equity of 5%, which is below the return of 7.8% that investors could expect to get from comparable securities. a. Find the sustainable growth rate of dividends and earnings in these circum- stances. Continue to assume a 40% plowback ratio. b. Find the new value of its investment opportunities. Explain why this value is negative despite the positive growth rate of earnings and dividends. c. If you were a corporate raider, would Aqua America be a good candidate for an attempted takeover?

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