(Answered) Determining the dividend discount model

Finance

Question: A company is expected to pay an annual dividend of $1.39 one year from today. You estimate that the dividend will grow by 5% per year for the two years after that and then grow at an annual rate of 1% indefinitely. The company has a weighted average cost of capital of 5%, an after-tax cost of debt of 2% and a cost of equity of 6%.

Required:

What are their shares worth today according to the dividend discount model (DDM)? Explain your answers and provides examples.

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