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Answer the following using the Time Value of Money Framework:

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Answer the following using the Time Value of Money Framework;Hint: If you need help consult the growth phases model slides attached.;1. ABC common stock is expected to have extraordinary growth of 20 percent per year for two years, at which time the growth rate will settle into a constant 6 percent. If the discount rate is 15 percent and the most recent dividend was $2.50, what should be the current share price?;(5 marks);2. What would be the expected price of a stock when dividends are expected to grow at a 25 percent rate for three years, then grow at a constant rate of 5 percent, if the stock's required return is 13 percent and next year's dividend will be $4.00? (5 Marks)

 

Paper#27055 | Written in 18-Jul-2015

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