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The common stock of Tommy's Tools sells for $27.50. The firm's beta = 1.2, the risk-free rate is 4%, and the market risk premium is
The common stock of Tommy's Tools sells for $27.50. The firm's beta = 1.2, the risk-free rate is 4%, and the market risk premium is 8%. Next year's dividend is expected to be $1.50. Assuming that dividend growth is expected to remain constant for Tommy's over the foreseeable future, what is the firm's anticipated dividend growth rate? Answer is 8.1% according to test, but why?
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