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Yesterday Western Software, Inc. paid its common stockholders a dividend equal to $2.00 per share. It...

Yesterday Western Software, Inc. paid its common stockholders a dividend equal to $2.00 per share. It is expected that the dividend will grow at a rate of 5 percent per year for the remainder of the company's life. If the appropriate rate of return for Western's stock ios 12 percent, what is the market value of its stock?

a. $30.00

b. $42.00

c. $16.67

d. $28.57

e. $17.50

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Answer #1

Current price=D1/(Required return-Growth rate)

=(2*1.05)/(0.12-0.05)

which is equal to

=$30

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