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22 Jan 2021
Q-4 (a): A share of stock has a dividend of D0 = $5. The dividend is expected to grow at a 20 percent annual rate for the next
10 years, then at a 15 percent rate for 10 more years, and then at a long-run normal growth rate of 10 percent forever. If investors
require a 10 percent return on this stock, what is its current price?
Q-4 (b): The Cristiano Book Production Company has been hit hard due to increased competition. The company’s analysts
predict that earnings (and dividends) will decline at a rate of 5 percent annually forever. Assume that ke = 11 percent and D0 =
$2.00. What will be the price of the company’s stock three years from now?
Q-4 (a): A share of stock has a dividend of D0 = $5. The dividend is expected to grow at a 20 percent annual rate for the next
10 years, then at a 15 percent rate for 10 more years, and then at a long-run normal growth rate of 10 percent forever. If investors
require a 10 percent return on this stock, what is its current price?
Q-4 (b): The Cristiano Book Production Company has been hit hard due to increased competition. The company’s analysts
predict that earnings (and dividends) will decline at a rate of 5 percent annually forever. Assume that ke = 11 percent and D0 =
$2.00. What will be the price of the company’s stock three years from now?
amirarsalanLv2
10 Jun 2023
2 Jun 2021
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