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The dividends and earnings of Company ABC are expected to grow as follows: - 20 percent a year for the next 10 years - 15 percent growth for another five years - 3 percent (constantly) after the 15 years The risk-free rate is 5 percent and the expected return on the market is 10 percent. The Beta for Company ABC is 0.8, and its current dividend is $1.55. Calculate the price of the stock at the beginning of Year 15

The dividends and earnings of Company ABC are expected to grow as follows: - 20 percent a year for the next 10 years - 15 percent growth for another five years - 3 percent (constantly) after the 15 years The risk-free rate is 5 percent and the expected return on the market is 10 percent. The Beta for Company ABC is 0.8, and its current dividend is $1.55. Calculate the price of the stock at the beginning of Year 15

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 23P
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The dividends and earnings of Company ABC are expected to grow as follows: - 20 percent a year for the next 10 years - 15 percent growth for another five years - 3 percent (constantly) after the 15 years The risk-free rate is 5 percent and the expected return on the market is 10 percent. The Beta for Company ABC is 0.8, and its current dividend is $1.55. Calculate the price of the stock at the beginning of Year 15
Transcribed Image Text:The dividends and earnings of Company ABC are expected to grow as follows: - 20 percent a year for the next 10 years - 15 percent growth for another five years - 3 percent (constantly) after the 15 years The risk-free rate is 5 percent and the expected return on the market is 10 percent. The Beta for Company ABC is 0.8, and its current dividend is $1.55. Calculate the price of the stock at the beginning of Year 15
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