TP Inc. is a young start-up company. No dividends will be paid on the stock over the
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Question:
TP Inc. is a young start-up company. No dividends will be paid on the stock over the next 8 years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a $40 per share dividend at the end of year 9 and thereafter it will increase the dividends by 5% per year forever. If the required rate of return on this stock is 10%, what is the current (today's) share price?
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