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You are considering the purchase of a common stock that just paid a dividend of $2.50. You expect this stock to have a growth rate
You are considering the purchase of a common stock that just paid a dividend of $2.50. You expect this stock to have a growth rate of 15% for the next year, 20% for the year after that, 25% in years 3 and 4 and then to have a long-run normal growth rate of 9% percent thereafter. If you this stock has a eta of 1.5 and the average return on the risk-free asset is 7% and the market is 13%, how much should you be willing to pay for this stock?
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