Demo Qs Topic 3 Part 2 - DEMONSTRATION LECTURE QUESTIONS...

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DEMONSTRATION LECTURE QUESTIONS TOPIC 3 VALUATION Part 2 Question 1 Gromixs Ltd is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 18 per cent during the next two years, 15 per cent in the third year, and then at a constant rate of 6 per cent thereafter. Gromix’s last dividend, which has just been paid, was $0.115. If the required return on the shares is 12 per cent, what is the price of a share today?
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Newsite Ltd is expanding rapidly. Its dividend growth rate for the coming year is projected at 25 per cent. This rate will decline by 5 percentage points per year until it reaches the industry average of 5 per cent. Once it reaches 5 per cent, it will stay there indefinitely. The most recent dividend was $0.85 per share, and the market requires a return of 16 per cent on investments such as this one. What is the price per share for Newsite? SOLUTION 2
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Demo Qs Topic 3 Part 2 - DEMONSTRATION LECTURE QUESTIONS...

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