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    Declining Growth Stock valuation

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    Brushy Mountain Mining Company's ore reserves are being depleted, so its sales are falling. Also, its pit is getting deeper each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 4% per year. If D0 = $5 and rs = 15%, what is the value of Brushy mountain's stock?

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    Solution Preview

    We use the constant growth model to calculate the price
    Price ...

    Solution Summary

    The solution explains the valuation of a declining growth stock

    $2.49

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