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You plan to buy some common stock today. The first cash you expect to receive is a dividend of $8.25 per share at the end of
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Answer #1

Expected future cash flow of stock are

Dividend of $8.25 after 2 years

$72 with the sale of stock after 2 years.

since required rate of return of stock is 8%

So today's price should be PV of dividend and stock price after 2 years

SO, stock price today = 8.25/1.08^2 + 72/1.08^2 = $68.80

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