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The most recently paid dividend by Bridges & Associates was $0.625 per share. For the coming 3 years, the annual growth of its dividend is
The most recently paid dividend by Bridges & Associates was $0.625 per share. For the coming 3 years, the annual growth of its dividend is expected to be 20%, 25% and 35% respectively. After 3 years, the dividend growth will slow down to a constant rate of 6% per year. The required rate of return on the stock of Bridges & Associates is 10%.
If an investor expects to earn a total return of 12%, is the stock currently over-valued or under-valued? Explain
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