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m and s Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at a rate of 10 percent per year. (a)
m and s Inc. is in a declining industry. Sales, earnings, and dividends are all shrinking at
a rate of 10 percent per year.
(a)
If the discount rate (r) = 15 percent and next dividend (D
1
)= $3, what is the value of a share?
(b) What price do you forecast for the stock next year?
(c) What is the expected rate of return on the stock?
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