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XYZ Corporation is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 18% during the next two
XYZ Corporation is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 18% during the next two years, at 15% in the 3rdyear, and at a constant rate of 6% thereafter. XYZ's last dividend was $1.15, and the required rate of return on its stock is 13%. Dividends are paid at the end of each year.
- Calculate the price of a share today.
- Calculate P1(stock price in one year) and P2(stock price in two years).
- Calculate the expected dividend yield, capital gains yield, and total yield for years 1, 2, and 3.
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