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Stock value

If a company experiences dividend growth of 30% for three years and 5% there after based on a $1.00 per share dividend in year zero, what is its value? (assume investors demand a return of 12% from similar companies)

Solution Preview

The value is the present value of all the dividends. Since the dividends become constant after 3 years, we use the constant growth model to find the PV of all ...

Solution Summary

The solution explains how to calculate the value of stock using the dividend discount model

$2.19