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Q3) Fatima Store is considering a cash purchase of the stock of Sarah Supplier. During the year Just completed, Sarah earned $4.00 per share
Q3) Fatima Store is considering a cash purchase of the stock of Sarah Supplier. During the year Just completed, Sarah earned $4.00 per share and paid dividend of $2.50. Sarah's earnings and dividend are expected to grow at 20% per year for the next 3 years, after which they are expected to grow at 5% per year to infinity. What is the maximum price that Fatima should pay for Sarah if Fatima requires a return of 15%? Clearly show your work steps
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