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Question
presently, stock a pays a dividend of $2.00 a share, and you expect the dividend to grow rapidly for the next four years at 20 percent. thus the dividend payments will be
year dividend
1 $1.20
2 1.44
3 1.73
4 2.07
after this initial period of super growth, the rate of increase in the dividend should decline to 8 percent. if you want to earn 12 percent on investments in common stock, what is the maximum you should pay for this stock?
Answer
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