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SpreadSpreadsheets are especially useful for computing stock value under different assumptions. Consider a firm that is expected to pay the following dividends:

Year 1 2 3 4 5 6

$1.20 $1.20 $1.50 $1.50 $1.75 $1.90 and grow at 5 percent thereafter

A. Using an 11 percent discount rate, what would be the value of this stock?

B. What is the value of the stock using a 10 percent discount rate? A 12 percent discount rate?

C. What would the value be using a 6 percent growth rate after year 6 instead of the 5 percent rate using each of these three discount rates?

D. What do you conclude about stock valuation and its assumptions?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91890844

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