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15 November, 01:39

dividend of $2.82 per share next year. the company pledges to increase its dividend by 3 percent per year indefinitely. if you require a return of 10 percent on your investment, how much will you pay for the company's stock today

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  1. 15 November, 05:12
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    The correct answer is $40.29

    Explanation:

    Price of stock (Po)

    D1 Dividend next year = $2.82

    r Required return = 10%

    g Growth rate = 3%

    Po = D1/r-g

    Po = $2.82 / 10%-3% = $40.285 = $40.29

    The price for the stock today is $40.29
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