You are considering buying stock in Travis Medical, a local company that provides PPO medical...
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You are considering buying stock in Travis Medical, a local company that provides PPO medical services. The dividend just paid (i.e. D0) was $1.00 and expected to increase by 10% per year for two years. Growth will then slow to 5% per year for the following three years as competitors enter the market, and finally slow to a 3% per year rate of growth thereafter similar to that of the economy overall. If you require a 9% rate of return, what is the most you should be willing to pay for a share of Travis Medical stock?
a. $18.712
b. $19.997
c. $20.492
d. $21.317
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