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Rocky company is experiencing a highly abnormal growth rate of 30%. This growth rate is expected to continue for three years. After year three, the
Rocky company is experiencing a highly abnormal growth rate of 30%. This growth rate is expected to continue for three years. After year three, the growth rate is expected to return to a normal 8% and remain constant forever. The company's last paid dividend (Do) was $1.15. If the required rate return on Rocky is 13.4%, what is the value of the stock today? Round intermediate calculations to at least four decimal places. Question 3 (5 points) Which of the following is False? (HINT: Slides 9-11) For the constant growth model to hold, a firm's cost of equity (rs) needs to be greater than its constant dividend growth rate (i.e., rs > g). From the constant growth model, if the constant dividend growth rate is equal to zero, a firm's share price is equal to the constant dividend divided by the cost of equity (i.e., g=0). For the constant growth model to hold, a firm's cost of equity (rs) needs to be smaller than its constant dividend growth rate (i.e., rs
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