The stock market return as the discount rate

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Reference no: EM13882079

Last year Star Inc paid a dividend of $1.50 on its common stock last year. You expect the dividend will increase at 15% each year over the next three years; but after that, a normal growth rate of 5% is expected for the foreseeable future. The stock market had a return of 15% last year.

Calculate the value of Star Inc using the 2-stage DDM model, with the stock market return as the discount rate.

Reference no: EM13882079

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