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Imagine that an IT company develops a new software. As the popularity of this product increases, the firm grows quite rapidly, 30% per year, for
Imagine that an IT company develops a new software. As the popularity of this product increases, the firm grows quite rapidly, 30% per year, for the next 3 years. Over time, as the market share of this new software increases, the firms growth rate will reach a steady-state, perhaps 8% per year, indefinitely. Assume that the firms most recent (Year 0) dividend was $1 per share and the markets required rate of return on this stock is 14%, what is the price of the stock P0?
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