Question

Babbalu Inc. just paid a dividend of $1 per share. Babbalu expects to increase its annual dividend by 20% per year for the next two years and by 15% per year for the following two years. Starting in year 5, Babbalu is expects to pay a constant annual dividend of $3 a share. What is the current value of this stock if the required rate of return is 12%?

$17.71
$18.97
$20.50
$21.08
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EBK CONTEMPORARY FINANCIAL MANAGEMENT
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ISBN: 9781337514835
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Publisher: CENGAGE LEARNING - CONSIGNMENT
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