It will pay to all earnings as dividends

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1. You want to start saving money to pay for your son's college tuition. Your son will go to a college 16 years from now and he will need $35,000 per year for 4 years starting at year 16. If the interest rate is 9% per year, how much should you save each year starting next year for the next 15 years?

2. Company Z-prime is like Z in all respects save one : Its growth will stop after 4 year. In year 5 and afterward, it will pay to all earnings as dividends. What is Z-prime's stock price? Assume next year's EPS is $15. (Please, explain where the numbers/results come from, having a hard time with this question, thank you)

Reference no: EM131845253

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