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Sam is considering buying a share with the following expected dividends: The dividend is expected to grow by 2% pa in perpetuity after Year 3
Sam is considering buying a share with the following expected dividends: The dividend is expected to grow by 2% pa in perpetuity after Year 3 . Therefore: The dividend at t=4 will be $5.20(1+0.02) The dividend at t=5 will be $5.20(1+0.02)2, and so on. Shareholders' required return is 8% pa. The required return and the growth rate are effective annual returns. Calculate the price of the stock in two and a half years (t=2.5) Sam is considering buying a share with the following expected dividends: The dividend is expected to grow by 2% pa in perpetuity after Year 3 . Therefore: The dividend at t=4 will be $5.20(1+0.02) The dividend at t=5 will be $5.20(1+0.02)2, and so on. Shareholders' required return is 8% pa. The required return and the growth rate are effective annual returns. Calculate the price of the stock in two and a half years (t=2.5)
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