8-11: Valuing Common Stocks with the Dividend Growth Model

Problem 8-11 Declining Growth Stock Valuation

Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 6% per year. If D0 = $6 and rs = 13%, what is the estimated value of Brushy Mountain's stock? Round your answer to the nearest cent.

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