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Assume dividends, if any, are paid annually. Assume, unless otherwise noted, a discount rate (including the real interest rate, expected long run inflation plus a
Assume dividends, if any, are paid annually. Assume, unless otherwise noted, a discount rate (including the real interest rate, expected long run inflation plus a risk premium) of 11%.
I A company is expected to pay a dividend of 3/share forever. What is its stock price?
II Instead, its dividends are expected to grow 4% (annually) forever. What is its stock price?
III What must be the expected growth rate for the company in II in order to have a stock price of 50 (the implied growth rate)?
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