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Apple Computer Incorporated is expected to grow at an exceptionally high rate over the next 3 years due to various new project launches.
(A) One Analyst estimates that this venture will result in a growth rate in dividends of 50% for the next 2 years and 30% for the third year, before reverting back to a constant rate of 8% that is expected to continue indefinitely afterwards. Assuming this scenario is correct, if Apple
Computer paid a $2.12 dividend yesterday (D0=$2.12) and the stock is valued according to a required rate of return of 12%, what is the value of a share of Apple Computer stock today?
(B) Another Analyst estimates that the venture will result in a 10% constant growth rate in dividends starting today that is expected to continue indefinitely into the future. Assuming this alternative scenario is correct, if Apple Computer paid a $2.12 dividend yesterday (D0=$2.12) and the stock is valued according to a required rate of return of 12%, what is the value of a share of Apple Computer stock today?
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Gabbys garage issued a bond with a 10-year maturity, a $1,000 par value, a 10 percent coupon rate, and semi-annual interest payments. Two years after the bond was issued, the going rate of interest on similar-risk bonds fell to 6 percent. Suppose the..
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $16 per share dividend in 10 years and will..
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