Purchase of common stock that paid dividend

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You are considering the purchase of a common stock that paid a dividend of $2.00 yesterday. You expect this stock to have a growth rate of 15% for the next 3 years, resulting in dividends of D1=$2.3, D2=$2.645, and D3=$3.04. The long-run normal growth rate after year 3 is expected to be 10% (that is, a constant growth rate after year 3 of 10% per year forever). If you require a 14% rate of return, how much should you be willing to pay for this stock?

Reference no: EM131336430

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