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Question7 1 pts BlueCorp. is growing quickly. Dividends are expected to grow at a rate of 18 percent for the next three years

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Answer #1

D1=(4*1.18)=4.72

D2=(4.72*1.18)=5.5696

D3=(5.5696*1.18)=6.572128

Value after year 3=(D3*Growth rate)/(Required rate-Growth rate)

=(6.572128*1.055)/(0.0894-0.055)

=$201.5579953

Hence current share price=Future dividends and value*Present value of discounting factor(rate%,time period)

=4.72/1.0894+5.5696/1.0894^2+6.572128/1.0894^3+201.5579953/1.0894^3

=$170.01(Approx).

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