Dividends will grow at annual rate of four percent forever

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You have been following a company, Marathon Capstone, Inc., that is about to go public this afternoon. You are fairly certain that the company will not pay dividends for the first eight years of its operations. At the end of the ninth year, you foresee receiving $1.50 per share as a dividend. You forecast that the tenth year's dividend will be $2.00 per share, the eleventh year's dividend will be $2.50 per share and after that dividends will grow at an annual rate of four percent forever. What would you pay for a share of Marathon's stock today if you wished to earn fourteen percent per annum on your investment?

Reference no: EM131013330

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