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Grominet is expected to pay an annual dividend of $2.8 one year from now. Analysts also expect...

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Finance

Grominetis expected to pay an annual dividend of $2.8 one year from now.Analysts also expect this dividend to grow at 10% per yearthereafter until the fifth year. After then, growth has not beenforecasted by analysts, but it is expected to be lower. Assume thatthe risk free rate of return is 3%, that the beta of Grominet is1.5 and the market risk premium is 5%. What is the expected growthrate after year 5 implied by a stock price of $43.40?

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The required return per CAPM 3155 1050 Price of the stock is the PV of the expected dividends The expected dividends are 28 per share for the 1st year with 10    See Answer
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Grominetis expected to pay an annual dividend of $2.8 one year from now.Analysts also expect this dividend to grow at 10% per yearthereafter until the fifth year. After then, growth has not beenforecasted by analysts, but it is expected to be lower. Assume thatthe risk free rate of return is 3%, that the beta of Grominet is1.5 and the market risk premium is 5%. What is the expected growthrate after year 5 implied by a stock price of $43.40?

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