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Compute the current share price if required return on stock

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Reference no: EM132551830

Metallic Bearings is a young start-up company. The firm plans to pay the following dividends - $9 in Year 1, $4 in Year 2 and $1 in Year 3. There will be no dividends paid on the stock over the next 9 years because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $17.50 per share in Year 13 and will increase the dividend by 5.5% per year thereafter.

Required:

Question 1: Compute the current share price if the required return on this stock is 16%

Reference no: EM132551830

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