Question
A new idea just arrived to Joseph Dfago. This idea makes his feet burn as he runs around the town of Rat Portage, Ontario raising
A new idea just arrived to Joseph Dfago. This idea makes his feet burn as he runs around the town of Rat Portage, Ontario raising money. Specifically, he wants to buy all shares of a wild moose processing and canning factory named Wendigo. Wendigo is in the state of financial distress and does not pay any dividends now. However, Dfago believes that under the new management, it will resume paying $5 dividend per share in five years from now. This dividend will grow at a rate of 3% per year from then on. Suppose that Dfago pays 15% interest on borrowings. What is the maximum price per share that makes Dfagos idea to invest in Wendigo viable?
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