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You buy a stock for $45. The company pays an annual dividend that grows by 2% each year, forever. The next is to be received
You buy a stock for $45. The company pays an annual dividend that grows by 2% each year, forever. The next is to be received in exactly 1 year. Investors require return of 12%.
a) what must be the amount of the first dividend? b) You sell immediately after you receive the first dividend. Investors still require a 12% return. How much of your return is due to capital gains? How much is due to dividends?
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