Question
ABC Inc. is mature firm in the machine-tool-component industry. The firms most recent common stock dividend was $2.40 per share. Due to its maturity as
ABC Inc. is mature firm in the machine-tool-component industry. The firms most recent common stock dividend was $2.40 per share. Due to its maturity as well as stable sales and earnings, the firms management feels that dividends will rise at 5% annually for the next 3 years, after which the dividend will grow at -3% forever. The required rate of return on this stock is 12%. (5 points) What is the current price of ABCs common stock? (3 points) What is the expected stock price one year from today? (2 point) What is the expected stock price 12 years from today?
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