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A company just reported earnings of $8.00 a share and paid a dividend of $4.00 a share. You believe that earnings and dividends will grow
A company just reported earnings of $8.00 a share and paid a dividend of $4.00 a share. You believe that earnings and dividends will grow 6% a year for the foreseeable future. Based on returns that other similar stocks are currently offering, you believe that an acceptable rate of return for investing in this stock would be 10%.
a) What would you be willing to pay for the stock today?
(b) What would you expect this stocks price to be one year from today?
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