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Price of dividend paying stock

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The corporation projects to pay a dividend of $0.75 next year and then have it grow at 12% for the next 3 years, before growing at 8% indefinitely thereafter. the equity has a required return of 10% in the market. What should the price of the stock be?

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Solution Summary

The solution explains the model for finding out price of stock, which is expected to pay a series of varying dividend.

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Please see attached file for complete solution as work done with the help of equation writer may not print here.

Solution:
NPVGO model is to be used.

Price of stock will be ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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