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EQUITY VALUATION Based on expected cash flow as represented with dividends: . V = D/k or V = D/( kg) or V=S[D/(1+k)] + [Dn+1 /(k-g)]/(1+k)

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EQUITY VALUATION Based on expected cash flow as represented with dividends: . V = D/k or V = D/( kg) or V=S[D/(1+k)"] + [Dn+1 /(k-g)]/(1+k)" Given rrr = 12% 3. No growth: dividend has been and expected to remain $2 per year What is the price of this stock? 4. Growth: recent $2 dividend is expected to grow by 6% (representing firm's growth) into the future What is the price of this stock

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