Suppose a company currently pays $1 in dividends, and dividends are expected to grow at a rate

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Suppose a company currently pays $1 in dividends, and dividends are expected to grow at a rate of 5% per year for two years and then grow at a rate of 3% per year, ad infinitum. If investors require an 8% return on their investment, the value of a share of stock is closest to:

A. $19.85

B. $21.20

C. $35.00

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Analysis Of Financial Statements

ISBN: 9781118299982

3rd Edition

Authors: Frank J. Fabozzi, Pamela Peterson Drake

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