Question

Atlantic Corporation is the largest logging company in the north eastern part of the United States. Their logging reserves are being depleted and is in turn causing sales to fall. In addition, new environmental protection policies are making it very difficult for the procurement of new logging sites. As a result, their dividends are declining at a constant rate of 5% per year. Dividends paid at the end of last year are $5 per share, and the required rate of return on the stock is 15%.

a) What is the value of Atlantic corporation stock? [Note: you are supposed to show every step of your calculation and interpret the result

Step 1

Last years dividend = D0 = $ 5 per share

Growth rate in dividend, g = -...

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