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Harrison: Stock valuation using constant dividend growth

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Harrison Clothiers stock currently sells for $20 a share. The stock just paid a dividend of $1.00 a share. The dividend is expected to grow at a constant rate of 10% a year. What stock prices is expected 1 year from now? What is the value per share of the company's stock?

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Solution Summary

Explains with calculations how to calculate the value of a constant growth stock.

Solution Preview

Given:
P0=$20
D0=$1
g=10%
We need to calculate P1
Since r=D1/P0+g Insert the values and calculate the value ...

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