Sometimes referred to as the horizon value

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Reference no: EM131070497

Suppose that a firm will pay dividends of $3.50 next year and $3 in two years. In year 3, the dividend will be $6, and afterwards the dividend will grow at a constant rate of 7% per year.

(i) What will be the value of each share of the firm in two years (sometimes referred to as the ‘horizon’ value’)?

(ii) What should be the value of each share of the firm right now?

Reference no: EM131070497

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