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Gentleman Gym just paid its annual dividend of $3.75 per share, and it is widely expected...

Gentleman Gym just paid its annual dividend of $3.75 per share, and it is widely expected that the dividend will increase by 6.5 percent per year indefinitely. What price should the stock sell at? The discount rate is 14 percent.

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Answer #1

Current price=D1/(Discount rate-Growth rate)

=(3.75*1.065)/(0.14-0.065)

which is equal to

=$53.25

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