Portfolio is expected to pay its first dividend

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Reference no: EM131300181

A stock that Melvin has just added to his portfolio is expected to pay its first dividend of $2.20 two years from now. The next year, the dividend will increase to $2.40, and at the end of the 4th year, the dividend will increase to $2.70. After the fourth year, future dividends are expected to increase at the rate of 4% per year, forever. If the stock’s required rate of return is 12%, what should the stock price be today?

Reference no: EM131300181

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