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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 Preview

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

    NPVGO model is to be used.

    Price of stock will be ...

    Solution Summary

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