.Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow...
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Question:
.Consider a firm that has just paid a dividend of $2. An analyst expects dividends to grow at a rate of 8% per year for the next five years. After that dividends are expected to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is 7%.
i.Calculate the dividends for years 1, 2, and 3.
ii.What is the price of the stock in year 5?
iii.Calculate the present value today of dividends for years 1 to 5.
iv.What is the price of the stock today (P0)?
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