What is the maximum price at which an investor can purchase

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Question - AMT's profits and dividends are expected to grow by 40 per cent a year for another two years. From the third year, growth is expected to fall to a more normal 5 per cent. In the year just ended, the company paid a dividend of $1 a share. The required return on the first round is 13%

Required -

a) What is the maximum price at which an investor can purchase the first round of shares?

b) List all the scenarios. What would be the answer to Part 1 above if the 40% increase lasted only one year instead of two?

c) Discuss why it is harder to value stocks than bonds.

Reference no: EM133036890

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