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This year, Shoreline Light and Gas (SL&G) paid its stockholders an annual dividend of $2.00 a share. A major brokerage firm recently put out a
This year, Shoreline Light and Gas (SL&G) paid its stockholders an annual dividend of $2.00 a share. A major brokerage firm recently put out a report on SL&G predicting that the company's annual dividends should grow at he rate o 10 per year for each o the next ve years and hen evel off and grow at the rate of 5% a year thereafter Note: efourde amal places al numbers in your intermediate calculations.) a. Use the variable-growth DVM and a required rate of return of 10% to find the maximum price you should be willing to pay for this stock. b. Redo the SL&G problem in part a, this time assuming that after year 5, dividends stop growing altogether (for year 6 and beyond, g 0). Use all the other information given to find the stock's intrinsic value. c.Contrast your two answers and comment on your findings. How important is growth to this valuation model? a. Using the variable-growth DVM and a required rate of retum of 10%, the maximum price you should be willing to pay for the stock is $ . (Round to the nearest cent)
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