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A share of common stock of XYZ Ltd. is expected to pay no dividends at the end of first year, but at the end of
A share of common stock of XYZ Ltd. is expected to pay no dividends at the end of first year, but at the end of the second year it will pay $2 dividends. Between years 2 and 4, the dividends stream is expected to grow at the annual rate of 50% and beyond year 4 the annual growth rate of dividends will be 5% into indefinite future. Suppose the required expected annual rate of return on the stock is 12% throughout the infinite horizon. Find the current price of this stock.
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