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What is the maximum stock price that should be paid for a stock today that is expected to consistently pay a $5 quarterly dividend (paid out to the investor) if its price is expected to be $100 in 3 years (12 quarters)? The investor expects a minimum acceptable rate of return (MARR) of 10% with quarterly compounding.

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Solution Summary

The maximum stock price is attained in this solution.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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