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Stock prices and dividends: Calculate the expected price of the stock

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A stock you are interested in paid a dividend of $1 last year. The anticipated growth rate in dividends and earnings is 20% for the next 2 years before settling down to a constant 5% growth rate. The discount rate is 10%.

Calculate the expected price of the stock.

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Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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