17. Negative Growth. Horse and Buggy Inc. is in a declining industry. Sales, earnings, and divi- dends

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17. Negative Growth. Horse and Buggy Inc. is in a declining industry. Sales, earnings, and divi- dends are all shrinking at a rate of 10% per year. (LO2)

a. If r = 15% and DIV = $3, what is the value of a share?

b. What price do you forecast for the stock next year?

c. What is the expected rate of return on the stock?

d. Can you distinguish between "bad stocks" and "bad companies"? Does the fact that the industry is declining mean that the stock is a bad buy?

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Fundamentals Of Corporate Finance

ISBN: 9780073382302

6th Edition

Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus

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Question Posted: Jul 31, 2024 11:01 AM

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17. Negative Growth. Horse and Buggy Inc. is in a declining industry. Sales, earnings, and divi- dends

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Fundamentals Of Corporate Finance

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