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Shimmer's is presently enjoying relatively high growth because of a surge in the demand for recreational vehicles. Management expects earnings and dividends to grow at a rate of 30% for the next 4 years, after which gas prices will probably reduce the growth rate in earnings and dividends to zero, g = 0. The company's last dividend, D0, was $1.25. Shimmer's beta is 1.2, the market risk premium is %5.25, and the risk-free rate is 3.00%.

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Question: What is the intrinsic value of Shimmer's common stock?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169358

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