Pharmecology is about to pay a dividend of $1.35 per share. It’s a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 2.75% per year.
a. What is Pharmecology’s current stock price? The nominal cost of capital is 9.5%.
b. Redo part (a) using forecasted real dividends and a real discount rate.
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