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15 July, 20:16

ABC Online Merchant has a current stock price of $42.50. The company paid $1.34 in dividends this year, and the dividends are expected to grow at 3% per year. If an investor has a required rate of return of 5%, what is ABC worth to that investor

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  1. 16 July, 00:15
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    The formula is to calculate stock price through dividend discount model is

    Share price = Dividend / (rate of return - dividend growth rate)

    =$1.34 / (5%-3%)

    =$67
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