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Question 39 Headland Tire’s current dividend is $5.00. Dividends are expected to grow by 25 percent...

Question 39

Headland Tire’s current dividend is $5.00. Dividends are expected to grow by 25 percent for years 1 to 3 and 10 percent thereafter. The required rate of return on the stock is 13 percent. What is Headland’s current stock price? (Round intermediate calculations to 4 decimal places, e.g. 7.1285 and final answer to 2 decimal places, e.g. 115.61.)

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Answer #1

Year pv @ 13% 0.8850 1 2 Cash flows $6.25 $7.81 $9.77 $358.07 Present value $5.53 $6.12 $6.77 $248.16 $266.58 0.7831 0.6931 0

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