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5. What price would you pay for a stock that just paid a $1 dividend has...

5. What price would you pay for a stock that just paid a $1 dividend has a 6% growth rate, if your required rate of return is 15%?

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Answer #1

Stock price = D0(1 + g) / (rs - g)

Stock price = $1(1 + 0.06) / (0.15 - 0.06)

Stock price = $11.78

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