Calculate the share price and compare

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MyFriends is an internet company well enough established for the Board of Directors to approve annual dividend of $2.00 per share.  

Given the companies previous performance investors anticipate the Board to increase the dividend at a rate of 5% per year.  

The current interest rate is 10%.

If the current market share price is $40 on the stock exchange, would this be a good buy? Why?

Hint:  A Example similar to this question is given in Chapter 6  Calculate the share price and compare to $40.

Reference no: EM132154560

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