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8) A fast growth share has the first dividend (t=1) of $1.07. Dividends are then expected to grow at a rate of 6 percent p.a.

8)

A fast growth share has the first dividend (t=1) of $1.07. Dividends are then expected to grow at a rate of 6 percent p.a. for a further 3 years. It then will settle to a constant-growth rate of 2.8 percent. . If the required rate of return is 18 percent, what is the current price of the share? (to the nearest cent)

a.

$7.56

b.

$7.04

c.

$20.55

d.

$5.43

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