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Nonconstant Growth Stock Valuation

Assume that the average firm in your company's industry is expected to grow at a constant rate of 4% and that its dividend yield is 5%. Your company is about as risky as the average firm in the industry and just paid a dividend (D0) of $1. You expect that the growth rate of dividends will be 50% during the first year (g0,1 = 50%) and 20% during the second year (g1,2 = 20%). What is the required rate of return on your company’s stock? What is the estimated value per share of your firm’s stock?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91934214

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