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A company expects to pay a dividend of $3.50 per share one year from today. The...

A company expects to pay a dividend of $3.50 per share one year from today. The dividend is expected to grow at 25 percent per year for two years. Thereafter, the dividend will grow at 4 percent per year in perpetuity. If the appropriate discount rate is equal to 12 percent, what is the price of the company's stock today?

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Cash flows Present value Year pv@12% $3.50 $3.13 1 0.892857 $4.38 $5.47 $3.49 2 0.79719 $3.89 0.71178 $50.60 Price at year 3

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