Dividend is expected to grow-what is estimated stock price

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Reference no: EM13927608

Stock ABC just paid a $1 dividend yesterday. The dividend is expected to grow at a rate of 25% for the next 3 years when the required return is 15%. After that, from year 4 and thereafter (forever), the expected dividend growth rate will be 5% and the required return on the stock will be 10%. What is the estimated stock price? (Hint: This is a two-stage question so you want to draw the graph of two stages and then calculate separately)

Reference no: EM13927608

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