Question
As an analyst at Churnem & Bernem Securities, you are responsible for making recommendations to your firm's clients regarding common stocks.After gathering data on Denver
As an analyst at Churnem & Bernem Securities, you are responsible for making recommendations to your firm's clients regarding common stocks.After gathering data on Denver Semiconductors, you have found that its dividend has been growing at a rate of 8% per year to the current (D0) $1.25 per share.You believe that an appropriate rate of return for this stock is 15% per year.
Suppose now that you believe that the company's new product line will cause much higher growth in the near future.Your new estimate is for a 20% annual growth for the first 3-year period, followed by a 8% growth rate.Using these new assumptions, what is the value of the stock?
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