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Chapter 7: Common Stock: ics, Valuation, and Issuance 261 7-9 Problems 1. General Cereal common stock dividends have been growing at an annual rate 7

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Chapter 7: Common Stock: ics, Valuation, and Issuance 261 7-9 Problems 1. General Cereal common stock dividends have been growing at an annual rate 7 percent per year over the past 10 years. Current dividends are $1.70 per shar What is the current value of a share of this stock to an investor who requires 12 percent rate of return if the following conditions exist? a. Dividends are expected to continue growing at the historic rate for the forese able future. b. The dividend growth rate is expected to increase to 9 percent per year. c. The dividend growth rate is expected to decrease to 6.5 percent per year s earnings and common stock dividends have been growin Chapter 7: Common Stock: ics, Valuation, and Issuance 261 7-9 Problems 1. General Cereal common stock dividends have been growing at an annual rate 7 percent per year over the past 10 years. Current dividends are $1.70 per shar What is the current value of a share of this stock to an investor who requires 12 percent rate of return if the following conditions exist? a. Dividends are expected to continue growing at the historic rate for the forese able future. b. The dividend growth rate is expected to increase to 9 percent per year. c. The dividend growth rate is expected to decrease to 6.5 percent per year s earnings and common stock dividends have been growin

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