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    stocks and dividends

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    1. Paid dividend of $2 per share. Expected to grow at a constant rate of 5% per year, and investors require a 15% rate of return on the stock. What is the stock's value?

    2. Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13%. Under these conditions, what is the stock's value?

    3. Return to the original 15% required rate of return and assume a dividend growth rate estimate increase to 7% per year, what is the stock value?

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    ** Please also see the attached file for better formatting in a word document **

    stocks and dividends
    1. Paid dividend of $2 per share. Expected to grow at a constant rate of 5% per year, and investors require a 15% rate of return on the stock. What is the stock's value?

    P = D_0(1 + g) where ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the given stock's value. Additionally, this solution includes a word formatted version of the problem steps for the convenience of the student.

    $2.19