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An investment advisor forecasts annual year-end dividends for Safe Energy Corp. (SEC) stock as shown below. If the stock if forecasted to be selling...

An investment advisor forecasts annual year-end dividends for Safe Energy Corp. (SEC) stock as shown below. If the stock if forecasted to be selling for $50.00 by rhe end of 2014, what would the stock price need to be at the start of 2010 to earn an overall 10% annual return over the 5 years. State any assumptions you need to make.
Year 2010 2011 2012 2013 2014
Dividends $1 $3 $4 $4 $3

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Dear Student, Please check the attached solutions of... View the full answer

CH230410_479664_FIN.doc

Y
ear
2010
2011
2012
2013
2014
R
ate
Price C
ash Flows
$
1.00
$
3.00
$
4.00
$
4.00
$
50.00
10%
$
40.17 Thus, the stock price need to be at the start of 2010 to
earn an overall 10% annual return...

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