Ranges of growth rates and resulting dividends

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Reference no: EM131429043

A stock pays dividends of $1.00 at t = 1. (D1 is provided here, not D0) It is growing at 20% between t =1 and t = 2, after which the growth rate drops to 13%, and will continue at that rate into the future. If the discount rate for this stock is 15%, what should be the value of the stock at t = 0? Hint: Make a diagram indicating ranges of the growth rates and the resulting dividends.

  • $53.04
  • $21.74
  • $55.70
  • $58.41
  • $61.16

Reference no: EM131429043

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