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QUESTION 8 Assume that 3Ms last dividend paid yesterday) was $3.05 per share. You expect dividends to grow at a constant ra
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Answer #1

This question requires application of constant growth dividend discount model according to which:

Po - Divi -9 Po = Price of Stock Divi = Estimated Dividends for Next Period r = Required Rate of Return 9 = Growth Rate

Based on the data in question,

Div1 = $3.05 * (1 + 5.7%) = $3.2239

0 3.2239 009 -0.057

Po=97.69

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