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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