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AA Co. has just paid a dividend of $0.52. Next year's dividend is expected to be...

AA Co. has just paid a dividend of $0.52. Next year's dividend is expected to be 15% higher, after which the dividend will remain the same indefinitely. Assuming shareholders require a rate of return of 20%, what is the price of the stock today?
$2.60
$2.99
$10.40
$11.96
0 0
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solution; PO-DO* (1+g)/(r-g) PO 0.52*(1.15)/(0.2-0.15) PO Current price Do Dividend just paid g growth rate r required return

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