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What is the expected constant growth rate

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Question 1

The stocks of Wonka Inc. are expected to sell for $20 per share three years from now. Wonka has just paid a dividend of $1.50 per share and the dividends are expected to grow at a rate of 7% per year for the next three years and at a certain constant rate afterward. Assuming the required rate of return is 15%:

a. What is the expected constant growth rate beginning in year 4?

b. What is the current price for Wonka stock?

Reference no: EM133116982

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