Question
An investor plans to invest in Stock A which is currently selling for RM 85 per share. The stock is expected to pay an RM3
An investor plans to invest in Stock A which is currently selling for RM 85 per share. The stock is expected to pay an RM3 dividend next year(at the end of year 1). In each subsequent year until the fifth year, the annual dividend is expected to grow at an annual rate of 20%. Starting in fifth year, the annual dividend is anticipated grow an annual rate of 10% through the eight year. Starting in the ninth year, dividends are anticipated to grow at an annual rate of 1%. All cash flows are to be discounted at an annual rate 7%. Should the investor purchase Stock A at its current price? Compute an explain your finding
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