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An investment in shares of Capital Home Group Ltd. just paid a dividend of $1 per share after the company announced a technological breakthrough. As
An investment in shares of Capital Home Group Ltd. just paid a dividend of $1 per share after the company announced a technological breakthrough. As a result, management expects the firm to grow dividends rapidly for five years at a growth rate of 20%, and then, as competitors catch up, they anticipate a 5% reduction in growth every year until the firm plateaus at a growth rate of 5%, which they expect to maintain indefinitely thereafter. A 15% return is acceptable to you, so you want to calculate your expected price for the firm's shares: i. Now, at time 0 ii. Five years from now, when the 20% rapid growth is finished iii. Seven years from now, when growth is constant at 5%
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