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Question
ABC Company has been growing at a 10% rate, and it just paid a dividend of D0 = $3.00. Due to a new product, ABC expects to achieve a dramatic increase in its short-run growth rate, to 20 percent annually for the next 2 years. After this time, growth is expected to return to the long-run constant rate of 10 percent. The company's beta is 2.0, the required return on an average stock is 11 percent, and the risk-free rate is 7 percent. What should the dividend yield (
/P0) be today?
a. 3.93%
b. 4.60%
c. 10.00%
d. 7.54%
e. 2.33%
Answer
This answer is hidden. It contains 303 characters.
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