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What should be the price of the stock to the public

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Question - The investment banking firm of Einstein & Co. will use a dividend valuation model to appraise the shares of the Modern Physics Corporation. Dividends (D1) at the end of the current year will be $1.60. The growth rate (g) is 8 percent and the discount rate (Ke) is 11 percent.

a. What should be the price of the stock to the public?

b. If there is a 4 percent total underwriting spread on the stock, how much will the issuing corporation receive?

c. If the issuing corporation requires a net price of $51.83 (proceeds to the corporation) and there is a 4 percent underwriting spread, what should be the price of the stock to the public?

Reference no: EM132616067

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