Homework Answers
The price is computed as shown below:
= 1 / 1 + required rate of return 5 x [ (Dividend in year 5 x (1 + growth rate) / (required rate of return - growth rate) ]
= 1 / 1.0995 x [ ($ 3.8 x 1.024) / (0.099 - 0.024) ]
= $ 32.36 Approximately
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