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Q10. Conroy Consulting Corporation (CCC) has been growing at a rate of 30% per year in recent years. This same nonconstant growth rate is expected
Q10. Conroy Consulting Corporation (CCC) has been growing at a rate of 30% per year in recent years. This same nonconstant growth rate is expected to last for another 2 years (g0,1 = g1,2 = 30%) (10 points)
- If D0 = $2.50, r0 = 12%, and g1 = 7%, then what is CCCs stock worth today? What are its expected dividend yield and capital gains yield at this time?
- Now assume that CCCs period of nonconstant growth is to last another 5 years rather than 2 years (g0,1 = g1,2 = g1,2 = g2,3 = g3,4 = g4,5 = 30%). How would this affect its price, dividend yield, and capital gains yield? Answer in words only.
- What will CCCs dividend yield and capital gains yield be once its period of nonconstant growth ends? (Hint: These values will be the same regardless of whether you examine the case of 2 or 5 years of nonconstant growth, and the calculations are very easy).
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