You are evaluating the purchase of cellars inc common stock, Ask an Expert

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You are evaluating the purchase of Cellars, Inc. common stock that just paid a dividend of $1.80. You expect the dividend to grow at a rate of 12% for the next three years. You plan to hold the stock for three years and then sell it. You estimate that a required rate of return of 17.5% will be adequate compensation for this investment. Calculate the present value of the expected dividends. Answer is (a), unclear how it is obtained?

A) $4.91

B) $5.40

C) $9.80

D) $6.80

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92296227

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