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A company will pay a $2 per share dividend in 1 year. The dividend in 2 years will be $4 per share, and it is expected that dURGENT!!

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Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

В C 1 Dividend 2 Year $2.00 $4.00 4 2 $4.20 6 7 Constant growth rate 5% Expected rate of return 8 14% $40.74 Current price of

Cell reference -

A В C 1 2 Dividend Year 2 1 2 4 -C4* (1+C7) 6 Constant growth rate Expected rate of return 0.05 7 0.14 8 9 |=NPV(C8,C3:C4)+C5

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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