Stock valuation
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Bikes R Us is a mature manufacturing firm. The company just paid a $10.50 dividend, but management expects to reduce the payout by 4.5 percent per year, indefinitely. If you require a 10 percent return on this stock, what will you pay for a share today?
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Solution Summary
The solution explains how to calculate the price of a stock with negative growth rate
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What we will pay is the present value of all dividends. Since dividends reduce by a ...
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