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Suppose ABC Corp. is expected to pay $20 in dividend next period, and the liquidation or salvation or termination value is $5. Your rate of
Suppose ABC Corp. is expected to pay $20 in dividend next period, and the liquidation or salvation or termination value is $5. Your rate of time preference or required rate of return is 5%. What price will you pay for this stock? Ahraz has a rate of time preference or required rate of return of 8%. What will be the price Ahraz will offer? If you and Ahraz are bidding for this stock, what will be the price? Explain why? Note: you and Ahraz are planning to buy this for one period. (3+3+4=10)
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