Your company paid a dividend of $2 last year. The growth rate is expected to be 20 percent for 1 year, 17 percent the next year, then the growth rate is expected to be a constant 10 percent thereafter. The required rate of return is 14 percent. What is the current market value of this share ?

Your company paid a dividend of $2 last year. The growth rate is expected to be 20 percent for 1 year, 17 percent the next year, then the growth rate is expected to be a constant 10 percent thereafter. The required rate of return is 14 percent. What is the current market value of this share ?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 16P

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Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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