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A matured company just paid a dividend of $6.49 per share yesterday. The company expects its...

A matured company just paid a dividend of $6.49 per share yesterday. The company expects its dividends to decline at a steady rate of 3.1 percent per year into the foreseeable future. Investors demand a rate of return of 8.8 percent of this company's stock. What should one share of the stock sell for today?

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Answer #1

Stock price = D0(1 + g) / (rs - g)

Stock price = $6.49[1 + (-0.031)] / [0.088 - (-0.031)]

Stock price = $52.85

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