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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
Consider a firm that distributes the entire annual earnings to its shareholders through dividends once a year. The firms dividends are expected to grow at a rate of per year for the next years until the end of From on the firms growth rate is expected to be per year forever. Assume that investors command return on the investments comparable to the firms 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 firms shares on the first day of at what price would you buy the shares?
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