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1. ABC Company currently pays a dividend of $1.2 pay share; the companys stock is selling at $55 per share and its dividend
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Answer #1

D0 = $1.2

D1 = D0(1+g)

= 1.2(1+0.07)

D1 = $1.284

P0 = D1 / (k - g)

55 = 1.284 / (k - 0.07)

(k - 0.07) = 1.284 / 55

k = 0.02335 + 0.07

k = 0.09335 or 9.34%

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