Question: Consider three investors: a. Mr. Single invests for one year. b. Ms. Double invests for two years. c. Mrs. Triple invests for three years. Company

Consider three investors:

a. Mr. Single invests for one year.

b. Ms. Double invests for two years.

c. Mrs. Triple invests for three years.

Company Z’s earnings and dividends per share are expected to grow indefinitely by 5% a year, the next year A’s dividend is $10 and the market capitalization rate is 8%.

Assume each invests in company Z. Show that each expects to earn a rate of return of 8% per year.

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