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A share of stock pays a $10 dividend at the end of each of the first year (t=1) and second year (t=2). After year 2
A share of stock pays a $10 dividend at the end of each of the first year (t=1) and second year (t=2). After year 2 (t=2), the dividend grows at a constant rate of 15% forever (in perpetuity). The required rate of return for investing in the stock is 25% per year. What is a fair price for the share of stock? (Hint: Consider the 1-year time-delay, necessitating an extra year of discounting, for the perpetuity
A) $72
B) $80
C) $88
D) $100
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