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Question 1 (25 marks) AAA Company plans to pay $1.44 per share in dividends for the next four years. Dividends are expected to grow by

Question 1 (25 marks)

AAA Company plans to pay $1.44 per share in dividends for the next four years. Dividends are expected to grow by 5% per year after that. Its equity cost of capital is 10%.

a/ Estimate the intrinsic value of AAA Company at the end of year 2020. (20 marks)

b/ If the trading price of AAA Companys share is $20/share, what recommendation would you make to your clients? Why? (5 marks)

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