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Part ii # 3 . Valuation of stocks Question 1 6 [ 5 marks ] Today is Dec. 3 1 , 2 0 7 0
Part ii # Valuation of stocks
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Today is Dec. and Houston Tea Party, Inc. HTP has just paid an annual dividend of $ per share. The companys dividend in one year from today will increase by and is expected to grow at the same rate each year thereafter. That is the firm is expected to pay a dividend of $ at the end of and its annual dividend will increase by each year. The market requires a return on the investments similar to HTPs equity shares. Find the price of the firms stock.
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Consider the Houston Tea Party HTP stock described in Question with the following changes:
Suppose you were considering buying shares of HTP on Dec. when the firm was about to pay an annual dividend of $ All other assumptions remain unchanged. What would you have paid for when you bought shares of HTP on Dec. Lecture notes p
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Question marks, plus bonus marks for the complete and correct answer
Open AEye Ltd is a software developer specialized in AIassisted medical imaging and diagnostic devices and is in its early growth phase. Today is Dec. and the firms earnings are expected to grow at a rate of for the next years until the end of From on Open AEyes growth will be at a rate of per year forever. Assume that all earnings are distributed through dividends at the end of each year, and the firm has just paid an annual dividend of $ per share for What will be the price of Open AEye stock if investors require a return?
Lecture notes pp
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