Calculate price of the stock

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The stock of Robotic Atlanta Corporation is trading at $40 each share. In the past, the firm has paid a constant dividend of $5 each share and it has just paid an yearly dividend. However, the company will announce today new investments that the market does not know about. It is expected that with these new investments, the dividends will grow at 5% forever. Assuming that the discount rate remains the same, what will be the price of the stock after the announcement?

Reference no: EM1366471

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