Q 3.12. A stock is paying a quarterly dividend of $5 in 1 month. The dividend is
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Q 3.12. A stock is paying a quarterly dividend of $5 in 1 month. The dividend is expected to increase every quarter by the inflation rate of 0.5% per quarter-so it will be $5.025 in the next quarter (i.e., paid out in 4 months). The prevailing cost of capital for this kind of stock is 9% per annum. What should this stock be worth?
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