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The Pioneer Corporation currently paid a $2.50 per share dividend on its common stock. Dividends are expected to grow forever at 3%, and investors require
The Pioneer Corporation currently paid a $2.50 per share dividend on its common stock. Dividends are expected to grow forever at 3%, and investors require a 10% rate of return. Pioneers management is planning to enter new, risky markets and thinks that the investors required rate of return will increase to 13% in response to the increased risk. What does the new expected dividend growth rate have to be for the plan to be a good decision?
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