What is the present value of the dividend stream

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Reference no: EM13244739

Chapman Inc.'s Mexican subsidiary, V. Gomez Corporation, is expected to pay to Chapman 50 pesos in dividends in 1 year after all foreign and US taxes have been subtracted. The exchange rate in 1 year is expected to be 0.10 dollars per peso. After this, the peso is expected to depreciate against the dollar at a rate of 4% a year forever due to the different inflation rates in the US and Mexico. The peso-denominated dividend is expected to grow at a rate of 8% a year indefinitely.

Chapman owns 10 million shares of V. Gomez.

What is the present value of the dividend stream, in dollars, assuming V.Gomez's cost of equity is 13%?

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Reference no: EM13244739

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