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Golden Goose Inc. (GG) just paid its annual dividend of $1 per share and is planning to increase its annual dividend by 10% for the
Golden Goose Inc. (GG) just paid its annual dividend of $1 per share and is planning to increase its annual dividend by 10% for the next 3 years. From 4th year onwards, the dividend will grow at an annual constant rate of 5% forever.
(a) What is the value of GG stock today if the required return is 11%?
(b) What would be the impact on GG stock price if the business expects the growth will not happen after 3 years, and investors expect GG to maintain constant dividend (the same amount as year 3) indefinitely? Please explain.
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