What’s the annual growth when the investment is made

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Reference no: EM132029305

Stock Valuation

A stock of lbj Inc. just payed $4 in dividends today and reported $5 of earnings per share. At t=1 and t=2 the firm makes an investment, as a result of which, just 40% of earnings are distributed as dividends. After this, all earnings will be distributed as dividends with a growth of 5%. The investment has a return of 30%.

a) What’s the annual growth when the investment is made?

Reference no: EM132029305

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