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• Example 3: What is the value of a stock that pays annual dividends of $1.50 and has an expected rate of return equal to 12.

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Answer #1

This is a type of Perpetuity,

Price of Stock = 1.50/0.12

Price of Stock = $12.50

Price of Stock In Year 10 = 1.50/0.12

Price of Stock In Year 10 = $12.50

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