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Assume the required return on equity for all firms in this question is 10% (i.e., ks=0.10 ). Part A: Firm A will pay total dividends
Assume the required return on equity for all firms in this question is 10% (i.e., ks=0.10 ). Part A: Firm A will pay total dividends of $1,000,000 per year in perpetuity. What is the value of firm A ? Part B: Firm B has 1 million shares outstanding and will pay a $1 dividend per share in perpetuity. What is the market value of firm B? Part C: Firm C currently trades for trade for $25 per share, will trade at $25.50 per share one year from today, and at $26.01 per share two years from today. Moreover, its dividends grow at a constant rate per year. Please compute the dividend growth rate (hint: you only need two of the prices)
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