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The Value of Stock

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Otobai Motor Company is currently paying a dividend of $1.40 per year. The dividends are expected to grow at a rate of 18% for the next three years and then a constant rate of 5% thereafter forever. What is the value of its current stock price? Assuming that the discount rate is 10%. Please show calculation.

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Solution Summary

The solution calculates the value of its current stock price.

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