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Current price of mission beach bananas shares

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Reference no: EM133059966

Read the example and answer the questions below.

Mission Beach Bananas Pty Ltd has a dividend policy whereby it will increase the dividend by $1.50 per share for the next four (4) years and pay a dividend of $10 per share forever after that time. The company has just paid a dividend of $1.75 per share.

a) If investors require a 5% return on similar companies, what is the current price of Mission Beach Bananas shares?

b) If investors require a 8% return what will be the current price of Mission Beach Bananas?

c) What does this tell you about the relationship between the required rate of return and the share price?

Reference no: EM133059966

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