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Consider a firm that distributes the entire annual earnings to its shareholders through dividends once a year. The firm's dividends are expected to grow at
Consider a firm that distributes the entire annual earnings to its shareholders through dividends once a year. The firm's dividends are expected to grow at a rate of per year for the next years until the end of From on the firm's growth rate is expected to be per year forever. Assume that investors command return on the investments comparable to the firm's stock. In addition, the firm has just paid an annual dividend of $ per share at the end of
Required: If you were considering buying the firm's shares on the first day of at what price would you buy the shares?
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