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Newco Inc. is a start up firm that is still in a period of rapid devlopment. The company plans on retaining all of its earnings
Newco Inc. is a start up firm that is still in a period of rapid devlopment. The company plans on retaining all of its earnings and pay no dividends for the next 5 years. Six years from now, the company projects paying an annual dividend of $1.00 a share and then increasing that amount by 3% annually thereafter. What is the value of their stock if the discount rate is 10%.
A. $3.41
B. $4.92
C. $6.19
D. $8.87
E. $9.22
Answer is D but I dont know how to get that answer. Please show me each step. Thanks
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