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4. (15pts) You are interested in investing in a FinTech company. It is expected that the company will not pay any dividends in the next
4. (15pts) You are interested in investing in a FinTech company. It is expected that the company will not pay any dividends in the next three years. In year 4 , a dividend of $2 per share will be paid out and it will grow at 5% for two years. Thereafter dividends will not grow anymore. Suppose dividends are always paid out at the end of the year. The company's beta is estimated to be 2 . The current forecast for the market risk premium is 7% and the risk-free rate is 1%. (1) (3pts) What is the required return of this stock? (2) (8pts) What is the highest price that you are willing to pay for this stock? (3) (4pts) Suppose the current best ask price in the market is $10. What type of order would you place to buy the stock
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