The required rate of return of the investment

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1. Company CS paid cash dividends of $1 per share. The management of the company estimates that the growth rate of dividends is 20% per year for the next ten years. After that the growth rate of dividends is expected to be 10% per year to infinity. What should be the price of the stock if the required rate of return of the investment is 15%?

$35.33

$76.89

$46.40

$57.77

2. Martin’s Inc. has paid an annual dividend of $2.50 a share. The dividends are expected to grow at 10% for the next five years. After that, dividends are expected to increase by 3% annually. What is the current value of this stock to you if you require a 9% rate of return on this investment?

$57.77

$46.66

$35.55

$24.44

Reference no: EM131447038

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