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    Fair value of stock

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    A certain stock has the following stream of expected dividends:

    t : 1 - 2 3 4 5 6 - 7
    ----------------------------------------------------
    CFt : $1.00 $1.10 $1.30 $1.60 $2.00

    What is the fair value of this stock if the required return is 15% and the stock will be sold after the dividend is received in Year 7 for an estimated $50.00?

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    https://brainmass.com/business/discounted-cash-flows-model/fair-value-stock-472637

    Solution Preview

    A certain stock has the following stream of expected dividends:

    t : 1 - 2 3 4 5 6 - 7
    ----------------------------------------------------
    CFt : $1.00 $1.10 $1.30 $1.60 $2.00

    What is the fair value of this stock if the required return is 15% and the stock will be ...

    Solution Summary

    The fair value of a stock has been calculated by discounting the expected dividends.

    $2.19

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