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What would be the market value for the supernormal growth

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Reference no: EM133000162

Problem 1: YouRock Nippster has a required rate of return of 13.4%. The company is experiencing a highly abnormal growth rate of 30%. This growth rate is expected to continue for three years. After year three, the growth rate is expected to return to a normal 8% and remain constant forever. If the company's last paid dividend was $1.15 what would be the market value (P0) for this supernormal growth rate stock?

a. $25.32
b. $33.42
c. $39.21
d. The question cannot be answered with the information given above

Reference no: EM133000162

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