Bread, Inc., has an odd dividend policy. The company has just paid a dividend of $6 per share and has announced that it will increase the dividend by $4 per share for each of the next five years, and then never pay another dividend. If you require an 11 percent return on the company's stock, how much will you pay for a share today?

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microbot949Lv2

17 Feb 2023

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14 Jul 2019

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You are looking into a company that has never paid a dividend. They have just announced that they will be paying a one-time dividend of $20 per share in two years. They estimate after that that they will be paying a dividend in year 4 of $2.00 and that they will increase that dividend payout by 15% per year for next 4 years and then increase the dividend by 5% each year for the foreseeable future after that. If the risk free rate is 2.80%, the risk premium on the market is 6.0% and the companyâs beta is 1.1.

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