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Solve the problem. Show your work and equations! Please do not show screenshots of Excel as your work shown.
3. The Company dividend appears to grow smoothly at a constant rate of 5.5%. Analysts forecast that next years dividend shou
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Answer #1

Based on constant growth dividend discount model

This question requires application of constant growth dividend discount model according to which: Po - Divi T-9 Po = Price of

Dius P = 7-9

So, we need to calculated Div8. Based on basic time value of money function,

FV = PV * (1 + g)n

Div8 = Div1 * (1 + g)7

Div8 = $3.8 * (1 + 5.5%)7

Div8 = $5.5278

5,5278 I7-014- 0.055

Py = 65.03

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