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Constant growing perpetuity

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Reference no: EM132509932

Summit Systems will pay a dividend of $1.50 next year. Investors expect Summit's dividend to grow by 2.8% per year forever. Assume that the company has a beta of 0.8, and Rf = 3% and E(RM) = 9%. What should be the stock's fair value today?

Hint: the stock's dividends follow a constant growing perpetuity.

Reference no: EM132509932

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