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QUESTION 25 ABC Inc. will pay a $2.00 dividend next year. It will pay a $3.00 the year after. Following this dividends will g
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Answer #1

Value after year 2=(D2*Growth rate)/(Discount rate-Growth rate)

=(3*1.08)/(0.12-0.08)

=81

Hence value of stock=Future dividend and value*Present value of discounting factor(rate%,time period)

=2/1.12+3/1.12^2+81/1.12^2

=$68.75

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