Determine the equilibrium price of bond

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Reference no: EM131897059

1. Great Pumpkin Farms just paid a dividend of $3.20 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the next three years, and a return of 11 percent thereafter. What is the current share price?

2. Explain how discounted cash flows analysis can be used to determine the equilibrium price (i.e., intrinsic value) of a bond. Please provide an example.

Reference no: EM131897059

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