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1) A fast growth share has the first dividend (t=1) of $3. Dividends are then expected to grow at a rate of 10 percent p. for a further 2 years.

1) A fast growth share has the first dividend (t=1) of $3.34. Dividends are then expected to grow at a rate of 10 percent p.a. for a further 2 years. It then will settle to a constant-growth rate of 1.5 percent. . If the required rate of return is 17 percent, what is the current price of the share? (to the nearest cent)

Select one:

a. $24.59

b. $49.96

c. $21.55

d. $34.86


2) A company has just paid its first dividend of $2.60. Next year's dividend is forecast to grow by 8 percent, followed by another 8 per cent growth in year two. From year three onwards dividends are expected to grow by 3.2 percent per annum, indefinitely. Investors require a rate of return of 15 percent p.a. for investments of this type. The current price of the share is (round to nearest cent)

Select one:

a. $24.79

b. $22.50

c. $12.07

d. $12.38

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