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    Current Market Value of Common Stock and Rate of Return

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    A firm is expected to pay a cash dividend of $1.10 one year from now, $2.20 two years from now, and $4.40 three years from now. Also, the market price of their common stock is expected to be $73 immediately following the dividend payment three years from now. What is the approximate current market value of this firm's common stock when the required rate of return is 18%?

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    Solution Preview

    Cash dividend of: 1.10 in one year, PV = 1.10/(1+0.18) = 0.9322
    Cash ...

    Solution Summary

    In just six lines of calculations, the posting is answered with ease.