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Suppose Maxwell Corporation will pay a dividend of $2.72 per share at the end of this year and $2.97 per share next year. You expect? Maxwell's share price to be $52.11 in two years. Assume that? Maxwell's equity cost of capital is 11.2%.
1. What price would you be willing to pay for a Maxwell share? today, if you planned to hold the share for two? years?
2. Suppose instead you plan to hold the share for one year. For what price would you expect to be able to sell a Maxwell share in one? year?
3. Given your answer in part b?, what price would you be willing to pay for z Maxwell share today if you planned to hold the sharefor one? year? How does this compare to your answer in part a??
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