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How much is the stock worth

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Question - Euro Motor Corporation is expecting dividends to grow at a 10% rate for the next two years. The corporation just paid a $2 dividend and the next dividend will be paid one year from now. After two years of rapid growth dividends are expected to grow at a constant rate of 6% forever.

i. If the required return is 12%, what is the value of Euro Motor Corporation common stock today?

ii. Assume that the annual dividend grows at a constant rate of 8% indefinitely instead of the supernormal growth. How much is the stock worth?

Reference no: EM133020483

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