A share of stock has a dividend of Do = $5. The dividend is expected to grow at a 20% annual rate for the next 10 years, then at a 15% rate for 10 more years, and then at a long-run normal growth rate of 10% forever...
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45. A share of stock has a dividend of Do = $5. The dividend is expected to grow at a 20% annual rate for the next 10 years, then at a 15% rate for 10 more years, and then at a long-run normal growth rate of 10% forever.
If investors require a 10% percent return on this stock, what is its current price?
100.00
82.35
195.50
212.62
The data given in the problem are internally inconsisten, ie the situation described is impossible in that no equilibrium price can be produced.
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