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Company ABC's earnings and dividends will grow at 0.5% monthly during the next five years. Its growth will stop after year 5. In year 6 and afterward, it will pay out all earnings as dividends. Assume next year's EPS is $10 and the dividend is $5 and the market capitalization rate is 9%.

What is ABC's stock price?

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Solution Summary

The solution explains the calculation of stock price using the 2-stage dividend discount model.

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