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Suppose Acap Corporation will pay a dividend of $ 2.75 per share at the end of this year and $ 2.95 per share next year. You expect? Acap's stock price to be $ 52.05 in two years. Assume that? Acap's equity cost of capital is 11.8%.

a. What price would you be willing to pay for a share of Acap stock? today, if you planned to hold the stock for two? years?

b. Suppose instead you plan to hold the stock for one year. For what price would you expect to be able to sell a share of Acap stock in one? year?

c. Given your answer in ?(b?),

What price would you be willing to pay for a share of Acap stock today if you planned to hold the stock for one? year? How does this compare to your answer in ?(a?)?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92712054

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