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Assume that you are considering the purchase of a stock which will pay dividends of $4.50 during the next year. Further assume that you will be able to sell the stock for $85.00 one year from today and that your required rate of return is 15 percent. How much would you be willing to pay for the stock today?

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Solution Summary

The solution gives detailed steps on calculating the price of stock if the value of dividend and rate of return are given. All the formula and calcuations are shown and explained.

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