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The Gordon Growth Model: Price of Stock

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Investors anticipate the Sweetwater Manufacturing Inc.'s next dividend, due in one year, will be $4 per share. Investors also expect earnings to grow at 5 percent in perpetuity, and they require a return of 10 percent on their shares. Use the Gordon growth model to calculate Sweetwater's stock price today.

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Solution Summary

Solution describes the steps to estimate the current price of stock.

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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