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You buy a share of stock today. The stock is paying dividends, and the first dividends to be paid at the end of the first year (t=1) is D1 = $2. Dividends are expected to grow at the annual rate of 5% through year 15 (t=15). Thereafter, starting in year 16, the growth rate will fall to 1% per year and will ensure indefinitely. The required rate of return is 12%.
Find Terminal Cash Flow, i.e. the present value at t=15 of the growing perpetuity that starts with D16.
a.
40.15
b.
39.69
c.
36.36
d.
38.18
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