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I want this question explained in very detail Chapter 8: Stock Valuation Question 4...

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Finance

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Chapter 8: Stock Valuation Question 4 (25 marks): A stock currently pays a dividend of $2 this year. Expected dividend growth is 10% (81) for the next five years and 5% (82) thereafter for an indefinite amount of time. Assume that the appropriate required rate of return is 8%. a. Draw a timeline showing the two-stage cash flows of the stock above. (5 marks) b. What is the present value of the dividends growing at the constant rate g2 of 5% per year forever? (10 marks) C. What is the value today of a share of this stock? (10 marks) (Show ALL workings)

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