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(Constant growth model) RealTime is a profitable firm that is not paying a dividend on its common stock. Rick White, an analyst for Schwab, believes...

7. (Constant growth model) RealTime is a profitable firm that is not paying a dividend on its common stock. Rick White, an analyst for Schwab, believes that RealTime will begin paying a $1.00 per share dividend in two years and that the dividend will increase 6% annually thereafter. Pattie Green, one of Rick’s colleagues at the same firm, is less optimistic. Pattie thinks that RealTime will begin paying a dividend in four years that the dividend will be $1.00, and that it will grow at 4% annually. Rick and Pattie agree that the required return for RealTime is 13%.
a. What value would Rick estimate for this firm?


b. What value would Pattie assign to the RealTime stock?

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552660_Fin (3).xls

(Constant growth model) RealTime is a profitable firm that is not paying a dividend on its common stock. Rick White, an
analyst for Schwab, believes that RealTime will begin paying a $1.00 per...

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