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Question
Since its inception five years ago, Companioni Gyms has not paid a dividend to its common stockholders, and it does not expect to pay a dividend for the next five years. Beginning six years from today, however, Companioni Gyms expects to pay a $2 dividend, which, from that point on, will increase by 10 percent per year forever. Stocks with similar risks have a required rate of return equal to 15 percent. What should be the market price of Companioni's common stock?
a. $19.89
b. $22.87
c. $17.29
d. $44.00
e. There is not enough information to answer this question.
Answer
This answer is hidden. It contains 78 characters.
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