1) R&C has announced that it will pay dividends of $2 per share in year 1,...
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1) R&C has announced that it will pay dividends of $2 per share in year 1, $2 per share in year 2, and $4 per share in year 3. The firm then expects its dividend to increase by 5% per year for two years (year 4 and 5). Thereafter the dividends will grow at 3% indefinitely. The required rate of return is 12%. What is the current value of the stock? a) 34.21 b) 38.89 c) 36.55 d) 43.20 e) None of the above. 1) R&C has announced that it will pay dividends of $2 per share in year 1, $2 per share in year 2, and $4 per share in year 3. The firm then expects its dividend to increase by 5% per year for two years (year 4 and 5). Thereafter the dividends will grow at 3% indefinitely. The required rate of return is 12%. What is the current value of the stock? a) 34.21 b) 38.89 c) 36.55 d) 43.20 e) None of the above.
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Solution The current value of the stock is 1 5 D D D3 D3 1 1 1i 1 i 1 i Where D ... View the full answer
Related Book For
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
Posted Date:
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