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Find the internal rate of return (IRR) of buying a $400 stock now that's expected to pay annual dividends forever, with the next $3 dividend
Find the internal rate of return (IRR) of buying a $400 stock now that's expected to pay annual dividends forever, with the next $3 dividend to be paid in one year (t=1). The dividend is expected to grow forever at 4% per annum . Therefore the second dividend (paid at t=2) is expected to be $3.12 (=(3*(1+0.04)^1). The IRR of buying this stock now is: Select one:
a. 4% pa
b. 4.75% pa
c. 4.94% pa
d. 8% pa
e. 12.75% pa
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