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Dialysis is a biotech company that is expected to experience short-term supernormal dividend growth rates...

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Finance

  1. Dialysis is a biotech company that is expected to experience short-term supernormal dividend growth rates of 50% in year 1, 40% in year 2 and 25% in year 3. After 3 years of supernormal growth, this company dividend is expected to grow at a constant rate of 5%. However, in most recent month, analysts have made downward projection on its short-term growth rates to 20% in year 1, 15% in year 2 and 12% in year 3 and long-term constant growth rate of 5% due to uncertainty of the world economy. If the most recent dividend paid is $2 per share and its required return remains at 15%, approximately how much do you expect the reduction in Dialysis stock price per share today?

A) $20.91

B) $17.93

C) $15.34

D) $10.87

E) $4.22

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