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2.(15 points) Suppose that the current share price of BK is Po = $27.40 and its beta is 1.08. The annual risk-free rate of interest

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2.(15 points) Suppose that the current share price of BK is Po = $27.40 and its beta is 1.08. The annual risk-free rate of interest is re = 2% and the expected annual rate of return on the market portfolio is I'm = 12%. Suppose that BK is expected to pay a dividend of D = $0.76 per share at the end of the year, and its dividend is expected to grow at a constant rate of 5% over the subsequent two years (so D2 is 5% greater than D, and D3 is 5% greater than D2). Its dividend is expected to grow at a constant rate g' thereafter. Assuming that the current stock price is equal to its intrinsic value, what is the expected rate of eventual dividend growth g

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