ABC Ltd’s ordinary shares currently sell for $22.50 each. The company’s executives anticipate a constant dividend growth rate of 10% p.a. with $2 per share being the expected amount of the next dividend to be paid at the end of the year. 

a. If you are considering purchasing ABC Ltd’s ordinary shares, what rate of return can you expect to earn? 

b. If you require a 17% return, should you purchase the shares?

Answer rating: 100% (QA)

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