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A company expects to pay $2.50 in dividends next year. Analysts expect the dividend to grow at 14% for 3 years after that, then at 12% per year for an additional year, prior to settling at the industry growth rate of 6%. 30 year treasury bonds are currently yielding 5%, the company's systematic risk index is 0.9 and analysts are projecting the average market return to be 12%. If the stock is currently trading for $80, should buy it or not? Explain your answer.

Financial Management, Finance

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