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A company's dividend grows at a constant rate of 3 percent p. Last week it paid a dividend of $2. If the required rate of return is 13 percent p.

A company's dividend grows at a constant rate of 3 percent p.a.. Last week it paid a dividend of $2.40. If the required rate of return is 13 percent p.a., what is the price of the share 5 years from now? (round to nearest cent)

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price of the... View the full answer

4 comments
  • hello the option of answer is between a) 28.66 and b) 27.82 some people have answered a and some people b are you sure this is the answer?
    • kkaebit
    • May 10, 2018 at 4:37am
  • Hi. This is the most accurate approach to solving the question. $28.66 is thus the correct solution. Thank you
    • joeytutor
    • May 10, 2018 at 4:48am
  • thank you
    • kkaebit
    • May 10, 2018 at 4:51am
  • you are welcome
    • joeytutor
    • May 10, 2018 at 4:53am

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Here is the solution... View the full answer

The solution is... View the full answer

2 comments
  • hello the option of answer is between a) 28.66 and b) 27.82 some people have answered a and some people b are you sure this is the answer?
    • kkaebit
    • May 10, 2018 at 4:37am
  • apologies, stock price as on year 5 = div 6 / (r-g)= 2.866/10% = 28.66
    • payaljain3
    • May 10, 2018 at 4:42am

Price of share 5... View the full answer

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