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Dividend Discount Models Zero Growth 1. Bill owns 2500 common shares of XLM Company. The shares are worth a total of $67,500. Bil also receives
Dividend Discount Models Zero Growth 1. Bill owns 2500 common shares of XLM Company. The shares are worth a total of $67,500. Bil also receives a total of $6,250 in annual dividends from the shares. The company has committed to maintaining the dividend payment at that level in perpetuity. Assume that Bill requires a return of 9% in order to be properly compensated for the risk associated with the investment. Using the information and assumptions above, use the Zero-Growth DDM to calculate the intrinsic value of a single share of XLM Company and to advise Bill as to whether or not he should buy additional shares at the current market value
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