Homework Answers
Value of stock is equal to the present value of all future dividends
= 2.75(1.35)/(1.105) + 2.75(1.35)^2/(1.105)^2 + 2.75(1.35)^2(1.25)/(1.105)^3 + 2.75(1.35)^2(1.25)^2/(1.105)^4 + 2.75(1.35)^2(1.25)^2(1.04)/(1.105)^4(10.5%-4%)
= $101.4012
i.e. $101.40 per share
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