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Varigrowth Inc. just paid a dividend of $2.9 (i.e.,D0=$2.9). Such dividend is expected to grow by 15% per year for the next 3 years, after
Varigrowth Inc. just paid a dividend of $2.9 (i.e.,D0=$2.9). Such dividend is expected to grow by 15% per year for the next 3 years, after which it is expected to grow at a long-run rate of 2%.
Assuming investors require a 20% return on the stock,
a) What is the price at t=3? (to the nearest cent)
b) What is its price today?(to the nearest cent)
c) What is your total rate of return (% to two decimals) if in one year the price is $24.63and the dividend is$3.24?
What is your dividend yield? What is your capital gain (loss) yield?
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