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Suppose that the last dividend, which the firm just paid on its stock, is $1.04 and it is expected that earnings and dividends will grow at a constant rate of 4.00% per year and that the stock's price will grow at this same rate. Let us assume that the stock is fairly priced and the required rate of return is 9.00%. When the growth rate is the required rate of return, you can use the following formula to calculate the price of the stock 5 years from today O Di X (1 + g) $20.80 O X Po X (1 + rs) $25.31 (1+g) $77.26 Po X (1 + 3)' $94.00 And the price of the stock 5 years from today is

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