Firm whose dividend growth is expected to decline gradually

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Reference no: EM131868562

Consider a firm whose dividend growth is expected to decline gradually. For the next two years, the dividend growth is expected to be 20%. In the following three years, dividends are expected to grow at 18%, 13%, and 10%, respectively. After year 5, dividends are expected to grow at 5% indefinitely. The firm’s current dividend (the dividend that has been just paid) is $1 per share and the required rate of return for the firm’s stock is 10%. What is the price of the stock today?

Reference no: EM131868562

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