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Problem 7
How much would you expect to pay for a stock with the following characteristics?
Expected quarterly dividends: $0.70
Expected stock price in 3 years: $15.00
Required market rate of return: 12%
You have no expectations regarding dividends after 3 years.

Problem 8
How much would you expect to pay for a stock that is expected to pay $1.00 quarterly dividends indefinitely? The expected market return is 14%.

How much would you expect to pay for the stock from the above problem if the dividend is expected to grow at 6% each year?

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Solution Summary

The expert determines what is expected to pay for a stock with the characteristics. The expected quarterly dividends are given.

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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