Question
Common stock valuation: Perry Motor's common stock just paid its annual dividend of $1.80 per share. The required return on the common stock is 12%.
Common stock valuation: Perry Motor's common stock just paid its annual dividend of $1.80 per share. The required return on the common stock is 12%. Estimate the value of the common stock under each of the following assumptions about the dividend:
(a.)Dividends are expected to grow at an annual rate of 0% to infinity.
(b.)Dividends are expected to grow at a constant annual rate of 5% to infinity.
(c.)Dividends are expected to grow at an annual rate of 5% for each of the next 3 years, followed by a constant growth rate of 4% in years 4 to infinity.
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