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Pabloski Co. has just paid a cash dividend of $4 per share. Investors require a 16% return from investments such as this. The company

 

Pabloski Co. has just paid a cash dividend of $4 per share. Investors require a 16% return from investments such as this. The company claims that its dividend is expected to grow at 7% per year indefinitely. a) What will the stock be worth in five years? (5 points) b) What would the stock sell for today if dividend was expected to grow at 21 % per year for the next 3 years and then settle down to 9% per year indefinitely? (10 points)

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To calculate the stock value we can use the dividend discount model DDM formula The DDM formula is as follows Stock Value Dividend Required Rate of Re... blur-text-image

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