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Smirnoff & Co is facing a rapid growth in earnings and dividends. Management projects that dividends will grow at a rate of 12% during year
Smirnoff & Co is facing a rapid growth in earnings and dividends. Management projects that dividends will grow at a rate of 12% during year 1, 10% during year 2, and 8% during year 3.
After that growth slows down to a normal rate of 5%. Company's required return is 9%. Last dividend paid (Do) was $3.50 per share.
Find: a. Horizon stock price;
b. Intrinsic stock value today.
c. Is the stock overpriced or underpriced if the market price today is $20 per share? Will an analyst issue a Buy or a Sell signal to the clients?
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