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please help QUESTION THREE You are advising a client who wishes to invest in A4 Ltd. The company has just paid a cash dividend of
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QUESTION THREE You are advising a client who wishes to invest in A4 Ltd. The company has just paid a cash dividend of $1.20 per share. Your projections indicate that this dividend will grow at a steady 4 percent per year. Your client expects a 17% return from this investment, given A4's risk profile. Assuming your dividend projections are correct: a. What is the current value of the share? b. How much dividend will be paid in Year 5 and how much will the share be worth at that time? You consult your boss regarding your assumptions. She has a different view of projected dividends for A4's. She believes that the company's new product will be a great success resulting in abnormal profits for the next three years with dividend growth of 20% per year during this period, but this would then slow down thereafter to 4% per year indefinitely. Based on your boss' assumptions: c. What is the current value of the share? (Please refer to Appendix 2 for formulas) (2 + 3 + 5 = 10 Marks)Step by Step Solution
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