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The common stock of Peachtree Paper, Inc., is currently selling for $40 a share. A dividend of $2.00 per share was just paid. You are
The common stock of Peachtree Paper, Inc., is currently selling for $40 a share. A dividend of $2.00 per share was just paid. You are estimating that this dividend will grow at a constant rate of 10%. (a)Using the variable growth DVM model. If the dividends are expected to have a growth rate of 10% in the future 3 years, and 8% in the following 2 years and remain constant at 5% from year 6, assuming 10% required return, what is the intrinsic value of the share? Is this a good investment if the share is bought at the current market price?
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