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Suppose a firm is expected to increase dividends by 1 6 % in year 1 and by 1 2 % in year 2 . After

Suppose a firm is expected to increase dividends by

16 %

in year

1

and by

12 %

in year

2 .

After that, dividends will increase at a rate of

5 %

per year indefinitely. If the last dividend was $

1

and the required return is

18 % .

What is the price of the stock?

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