What is the first year dividend

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Reference no: EM132432688

Problem: City Foods, is a firm that is experiencing rapid growth. The firm just paid a dividend of $5.00 yesterday. They expect to see their dividend grow at a twenty percent rate for the next two years and then level out at a continuous ten percent growth rate. City Food's required rate of return is twenty percent.

Required:

Question 1: What is the first year dividend? (sample answer: $2.50)

Question 2: What is the horizon, or terminal value? (sample answer: $25.45)

Question 3: What is the most you would pay for City Foods' common stock now? (sample answer: $24.45)

Reference no: EM132432688

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