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What is the total return on your founders investment

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Reference no: EM132383010

Pink corporation is expanding rapidly and therefore it is paying no dividends for 2 years. the first dividend is payable at the end of the third yet is $2. During years 4,5 and 6 the dividends will grow at a rate of 25% a year. After year 6 the company will grow at a constant rate of 8% per year.

Calculate the value of the stock today if required return on the stock is 13% (please draw a timeline to show the cash flows.

  1. You purchased founders shares one year ago for $20 per share. you have just sold your shares for $25 per share. During the year you received one dividend of $2.50. What is the total return on your founders investment?

Reference no: EM132383010

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