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What should cherry stock price be

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Reference no: EM133121223

Cherry Auto Sales just opened and does not expect to pay a dividend during its first year. At the end of its second year, Cherry's owners expect to pay a $2.00 dividend and plan to increase it 7% annually. If the required return is 20%, what should Cherry's stock price be?

Please explain in details how did we got from the first price of 15.38 to 12.82. Supplement each step with statements explaining the step.

Reference no: EM133121223

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