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Riker Departmental Stores management has forecasted a growth rate of 40 percent for the next two years, followed by growth rates of 25 percent and

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Riker Departmental Stores management has forecasted a growth rate of 40 percent for the next two years, followed by growth rates of 25 percent and 20 percent for the following two years. It then expects growth to stabilize at a constant rate of 7.5 percent forever. The firm paid a dividend of $3.50 recently. If the required rate of return is 18 percent, what is the current value of Riker's stock? Hint: Calculate the expected dividends for years 1 through 5 using the appropriate growth rates. Next, compute the present value of the dividends in years 1 through 4. Use the expected dividend in year 5 to calculate P4, find the present value of P4, and add this result to the present value of the dividends in vears 1 through 4

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