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C&P Trading Inc., is entering into a 3-year remodeling and expansion project. Last year, the company paid a dividend of $3.40. It expects zero growth
- C&P Trading Inc., is entering into a 3-year remodeling and expansion project. Last year, the company paid a dividend of $3.40. It expects zero growth in the next year. In years 2 and 3, and 5% growth is expected, and in year 4, and 15% growth. In year 5 and thereafter, growth should be a constant 10% per year. What is the maximum price per share that an investor who requires a return of 12% should pay for Home Place Hotels common stock?(15')
- Find the value of the cash dividends at the end of each year. 4'
- Find the present value of the dividends expected during the initial growth period.3'
- Find the value of the stock at the end of the initial growth period. 4'
- Find the value of the stock. (Sum of PV of dividends during initial growth period and PV price of stock at end of growth period) 4'
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