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    Present Value of Growth Opportunity

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    Cisco will pay a dividend of $5 per share next year, and the dividends pay out ratio is 50%. Dividends are expected to grow at a constant rate of 8% forever and the required rate of return on the stock is 13%. Calculate the present value of the growth opportunity.

    a. $100
    b. $76.92
    c. $23.08
    d. None of the above

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    Solution Summary

    Solution explains Present Value of Growth Opportunity

    $2.19

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