Question: Bayboro Sails is expected to pay dividends of 2 50 3 00
Bayboro Sails is expected to pay dividends of $2.50, $3.00, and $4.00 in the next three years—that is, D1 = $2.50, D2 = $3.00, and D3 = $4.00, respectively. After three years, the dividend is expected to grow at a constant rate of 4 percent per year indefinitely. Stockholders require a return of 14 percent to invest in Bayboro’s common stock. Compute the value of Bayboro’s common stock today.
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