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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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Suppose you believe that the economy is just entering a recession. Your firm must raise capital immediately, and debt will be used. Should you borrow on a long-term or a short-term basis? Why?

Summary Introduction

To determine: Expected stock price 4 year from today.

Introduction:

Stock valuation of a constant growth

It is method of calculating company stock value; the valuation of the stock on the basis on the present value of the future cash flow or earnings on the constant growth.

Explanation

Determine the current price of the stock:

CurrentStockprice=Dividend1(Requiredrategrowthrate)=$2.75(15%5%)=$27.50

Therefore, current price of the stock is $27.50

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