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ABC Co. plans to retain and reinvest all of its earnings for the next 3 years. At the end of year 3, ABC Co. will
ABC Co. plans to retain and reinvest all of its earnings for the next 3 years. At the end of year 3, ABC Co. will pay a special dividend of $5/ share. At the end of the year 4, ABC Co. will begin to pay a dividend of $1/ share, which is expected to grow at a 3% rate annually (forever). Given a required return of 12%, what should the stock sell for today (choose the answer that most closely follows your calculations)?
Select one:
a. $14.27
b. $11.47
c. $12.44
d. $13.15
e. $15.01
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