Question: Not sure how to calculate this, please help. Consider a firm that is expected to pay the following dividends: Year 1 2 3 4 5

Not sure how to calculate this, please help.

Consider a firm that is expected to pay the following dividends:

Year

1

2

3

4

5

6

$1.20

$1.20

$1.50

$1.50

$1.75

$1.90

And grow at 5% thereafter

A. Using an 11 percent discount rate, what would be the value of this stock?

B. What is the value of the stock using a 10 percent discount rate? A 12 percent discount rate?

C. What would the value be using a 6 percent growth rate after Year 6 instead of the 5 percent rate using each of these three discount rates?

D. What do you conclude about stock valuation and its assumptions?

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