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Day 7: Review Review all your work in the past 6 days AND solve the following questions: Firm XYZ just paid a dividend of $1.9.

Day 7: Review

Review all your work in the past 6 days AND solve the following questions:

  1. Firm XYZ just paid a dividend of $1.9. The dividend will grow by 5% for two years and 8% for another three years. After that, the dividend growth rate will decrease to 3% and last forever. How much would you like to pay for this stock if your required rate of return is 9%?

  1. Firm ABC is expected to pay $2 dividend in one year. This $2 dividend will keep constant for another three years and then grow by 5.8% for three years. After that, the dividend will keep constant again. How much would you like to pay for this stock if your required rate of return is 6%?

  1. Firm JFK is expected to pay $2.8 dividend in one year. This $2.8 dividend will keep constant for another four years and then grow by 4.2% for three years. After that, the dividend will grow by 3.9% forever. How much would you like to pay for this stock if your required rate of return is 7.6%?

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