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You just received your tax refund (wow - it's so nice of you to lend the U.S. government money at zero percent interest!) and you

You just received your tax refund (wow - it's so nice of you to lend the U.S. government money at zero percent interest!) and you are looking to add a stock to your portfolio - you just don't want to overpay - so you decide to estimate the price of your next stock using theGordon Model (Bet it's in your text in chapter 7AND in the notes we wrote for that chapter). You are looking at XYZ Corp (OK - so I ran out of dead things) and it expects to pay a dividend of $2.50. XYZ's earnings are growing at an annual rate of 5% - last year's net income topped $1.5 million on sales of just $10 million. You do have some standards for any stock however. You have established a required rate of return for any stock added to your portfolio to be 13%. With this information at your disposal, what should you expect to pay for a share of XYZ?

Hint: IF you decide it might be a good idea to do something with those two percentages in this problem, make sure you change them to decimals when you plop them into the appropriate formula.

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