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ABC Inc. paid $2/share in dividends yesterday. The firm expects that its dividends will grow at 15% over the next 2 years, 10% in year
ABC Inc. paid $2/share in dividends yesterday. The firm expects that its dividends will grow at 15% over the next 2 years, 10% in year 3, and 3% thereafter.
1. Calculate the ABC Inc's dividend payments in years 1, 2, 3, and 4.
2. Calculate the appropriate discount rate (expected return) if ABC Inc has a beta of 2 and the expected market return (annual) is 5%. Assume that the risk free rate is 1%.
3. What is the stock price of ABC Inc. today?
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