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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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