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ABC Corp. Recently paid a dividend of $1.70 per share, is currently expected to grow at a consistent rate of 5%, and has a required
ABC Corp. Recently paid a dividend of $1.70 per share, is currently expected to grow at a consistent rate of 5%, and has a required return of 11%. ABC Corp. has been approached by a new company. ABC estimates if it buys the company, its constant growth rate would increase to 6.5%, but the firm would also be risker, therefore increasing the required return of the company to 12%. Should ABC go ahead with the purchase of the new company?
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