Question company z-primes earnings and dividends per share, Ask an Expert

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Question: Company Z-prime's earnings and dividends per share are expected to grow by 4% a year. Its growth will stop after year 4. In year 5 and afterward, it will pay out all earnings as dividends. Assume next year's dividend is $8, the market capitalization rate is 14% and next year's EPS is $15. What is Z-prime's stock price?

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