Using the appropriate dividend discount model

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Reference no: EM131616151

A company just paid a dividend of $2.00 per share (i.e. T=0). Analysts expect the company will be able to increase dividend payments by 10.0% per annum for each of the next three years and by 2.0% in perpetuity every year thereafter (or indefinitely). The appropriate cost of equity is 7.0%. Using the appropriate dividend discount model, one share of the stock is valued at:

A) $51.80

B) $50.67

C) $49.80

D) $47.77

E) $46.96

Reference no: EM131616151

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