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Find the price today of a young growth companys stock that is not expected to pay any dividends for the next nine years, but

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Answer #1

HI

Here dividend after 10 years D10 = $4

growth rate g = 3%

rate r = 10%

As per dividend discount model

Price of stock P today= (D10/(r-g))*1/(1+r)^(10-1)

P = 4/(10%-3%)*(1/1.1)^9

= (4/0.07)*0.42

= $24.23

Thanks

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