Compute today price of the stock

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Question - Non-constant growth model

1. Suppose the company just paid dividend of $1. The dividends are expected to grow at 20% in Year 1 and 15% in Year 2. After that, the dividends will grow at a constant rate of 5% forever. If the required rate of return is 10%, compute today's price of the stock.

2. Suppose the company just paid dividend of $1. The dividends are expected to grow at 25% in Year 1 and 20% in Year 2, and 15% in Year 3. After that, the dividends will grow at a constant rate of 5% forever. If the required rate of return is 10%, compute today's price of the stock.

3. Suppose the company will not pay any dividend in Year 1. Suppose that the company pays dividend of $2 in Year 2 and after that the dividend will grow at 20% in Years 3 to 5. After that the dividends will grow at a constant rate of 6% forever. If the required rate of return is 10%, compute today's price of the stock.

Reference no: EM132829456

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