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Find the fair value of the security

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Reference no: EM132487073

Question 1 Consider a security that pays annual dividends. It just paid $2.50 dividends per share and the next dividend will be paid in 1 year. The dividend is expected to grow at the rate of 6% per annum for the next four years. After the fourth year, the dividend is expected to grow at a terminal rate of 1% per year forever. Find the fair value of the security if the annual cost-of-capital is 14%.

Reference no: EM132487073

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