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Determining the dividend discount model

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A firm is expected to pay a dividend of $5.00 in one year. It will then have extraordinary growth in dividends of 25% for each of the next 3 years, after which (i.e., beginning in year 5) it will face more competition and slip into a constant perpetual growth rate of 5%. What should the price of the stock today be based on the dividend discount model? The required return is 14%.

Reference no: EM131594788

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