Determining the value of the stock-denver semiconductors

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After gathering data on Denver Semiconductors, you have found that its dividend has been growing at a rate of 8% per year to the current (D0) $1.20 per share. You believe that an appropriate rate of return for this stock is 12% per year. If you expect that the dividend will grow at an 8% rate forever, what is the highest price at which you would recommend purchasing this stock to your clients?

Your new estimate is for a 20% annual growth for the first 3-year period, followed by an 8% growth rate thereafter. Using these new assumptions, what is the value of the stock?

Reference no: EM132466475

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