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18. Suppose that you buy a share of common stock for $80. Last year, the stock paid a dividend of $4 per share (Do
18. Suppose that you buy a share of common stock for $80. Last year, the stock paid a dividend of $4 per share (Do = $4), and dividend payments are expected to grow at a rate of 10% per year for the foreseeable future. In one year, you expect the stock's price will have increased to $88 per share. In 2 years, you expect the price will be $96.80 per share. a. If you plan to hold the stock for 1 year, draw the timeline of your expected cash flows. b. What is your expected dividend yield? c. What is your expected holding period rate of return? d. If you plan to hold the stock for two years, draw the timeline of your expected cash flows. e. What is your expected average dividend yield for the planned two-year holding period? f. What is your expected holding period rate of return?
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