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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 4% per year for the next 5 years until the end of 2035. From 2036 on, the firms growth rate is expected to be 2% per year forever. Assume that investors command 12% return on the investments comparable to the firms stock. In addition, the firm has just paid an annual dividend of $10 per share at the end of 2030. Required: If you were considering buying the firms shares on the first day of 2031, at what price would you buy the shares?

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