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    Modular Systems Inc: The Expected Value of the Next Dividend

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    Modular Systems Inc. just paid dividend D0, and it is expecting both earnings and dividends to grow by 0% in year 2, by 5% in year 3, and at a rate of 10% in year 4 and thereafter. The required rate of return on Modular is 15%, and it sells at its equilibrium price, P0 = $49.87. What is the expected value of the next dividend, D1?

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    Solution Preview

    The equilibrium price is the present value of all the future cash flows associated with the stock, thus, we ...

    Solution Summary

    This tutorial provides the steps to find the expected value of a next dividend based on a required rate of return of 15%.