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14 January, 10:55

Assume that Bon Temps is expected to experience supernormal growth of 30% for the next 3 years, then to return to its long-run constant growth rate of 6%. What is the stock's value under these conditions? What are its expected dividend yield and its capital gains yield in Year 1? In Year 4?

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  1. 14 January, 13:45
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    Expected value one year from now=D2 / (k-g)

    =2.25 / (16%-6%)

    =22.5
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