Variable Growth A fast growing firm recently paid a dividend of $0.50 per share. The dividend...

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Variable Growth A fast growing firm recently paid a dividend of$0.50 per share. The dividend is expected to increase at a 20percent rate for the next 3 years. Afterwards, a more stable 10percent growth rate can be assumed. If a 12 percent discount rateis appropriate for this stock, what is its value?'
Equation:
Constant growth model = P0 = D0(1+g)
________
I - g

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3.8 Ratings (508 Votes)

Step1 Dividend per share for the next 3 years Dividend in Year 0 D0 050 per share Dividend in Year 1 D1 060 per share 050 x 120 Dividend in Year 2 D2 072 per share 060 x 120 See Answer

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Variable Growth A fast growing firm recently paid a dividend of$0.50 per share. The dividend is expected to increase at a 20percent rate for the next 3 years. Afterwards, a more stable 10percent growth rate can be assumed. If a 12 percent discount rateis appropriate for this stock, what is its value?'Equation:Constant growth model = P0 = D0(1+g) ________ I - g