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Do think the model for stock valuation is appropriate

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Problem 1: Suppose a company currently pays an annual dividend of $2.80 on its common stock I a single annual installment, and management plans on raising this dividend b 6% per year indefinitely. If the required return on is 12%, what is the current share price?

Problem 2: Now suppose the company actually pays its annual dividend in equal quarterly installments: thus, the company has just paid a dividend of $.70 per share, as it has for the previous three quarters. What is your value for the current share price now? Do you think this model for stock valuation is appropriate?

Reference no: EM132986408

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