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Amazin just announced that it will begin paying dividends next year! It expects to pay a $4.75 annual dividend in exactly one year. Dividends are
- Amazin just announced that it will begin paying dividends next year! It expects to pay a $4.75 annual dividend in exactly one year. Dividends are expected to grow at 15% annually for the next 5 years followed by a 7% constant annual growth rate in years 6 to infinity. Investors require a return of 12%. What is the current price for Amazins stock? (note that to answer this question you should follow the steps in the questions below).
- What is D1?
- What are the dividends for the initial growth rate (until growth levels off)?
- What is the price of the stock from years 6 to infinity? Note that we would have to find the price at the end of year 5.
- What is the PV of the stocks cash flows (year 15 dividends and year 5 stock price)?
- What is Amazins current stock price?
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