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Question;Suppose a dividend of $1.25 was paid. The stock has a required rate of return of 11.2% and investors expect the dividend to grow at a constant rate of 10%. Complete parts (a) through (e) below.a) Compute D0, D1, D2, D3 and D7.b) Compute the present value of the dividends for t = 3 years.c) Compute the current market price.d) Assume that the constant growth rate is actually 0%. What is the current market price?e) Describe the behavior of the present value of each future dividend (i.e. the behavior as t increases).

 

Paper#51277 | Written in 18-Jul-2015

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