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Suppose D0 = $10.00 and rs (cost of equity) = 20%. The expected growth rate from Year 0 to Year 1 (g0 to 1) =
Suppose D0 = $10.00 and rs (cost of equity) = 20%. The expected growth rate from Year 0 to Year 1 (g0 to 1) = 10%, the expected growth rate from Year 1 to Year 2 (g1 to 2) = 15%, and the constant rate beyond Year 2 is gn = 5%. Part (A): What are the expected dividends for Year 1 and Year 2? Part (B): What is the expected horizon value price at Year 2? Part (C): What is the expected P0?
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