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    Stock's current intrinsic value

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    WWW Servers just paid a dividend of D0 = $1.00. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on WWW's stock is 9.00%. What is the best estimate of the stock's current intrinsic value?

    A. $31.50
    B. $32.31
    C. $33.14
    D. $33.99
    E. $34.84

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    Solution Preview


    Year Dividend
    1 1.3 (30% growth )
    2 1.43 (10% growth)
    3 1.50 (5% growth)

    From year 3 onwards, the dividends would be growing ...

    Solution Summary

    Response helps in estimating the stock's current intrinsic value