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All 3 questions are a part of one problem so please answer all 3. Dillon Inc. is considering investing in a 30-year $1,000 bond with
All 3 questions are a part of one problem so please answer all 3.
Dillon Inc. is considering investing in a 30-year $1,000 bond with a 3.0% coupon, interest paid semiannually. The current market interest rate is 4.5%, and the bond is priced at $790. Dillon Inc paid a dividend last year of $1.50. Dividends are expected to grow at a rate of 15% this year, 13% next year, 10% the following year and 5% thereafter. The required rate of return is 15%. 2) Suppose the bond described above pays interest annually rather than semiannual and the bond is priced at $730. What is the maximum price Dillon should pay for the bond? Should Dillon purchase the bond? 3) What is the price of the stock for Dillon 1 years from now? 4) What is the price of the stock for Dillon 3 years from nowStep by Step Solution
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