While looking after your investments you find growth stock

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While looking after your investments you find a growth stock which you feel may have been neglected by the rest of the market. You forecast the following annual dividends: Year 1: $0.50, Year 2: $0.75, Year 3: $1.00. Following Year 3, you expect dividends to grow at 3% in perpetuity. If you deem the stock to have an 11% required return, what is the company's horizon value in Year 3? Considering this horizon value and the projected dividends, what is the intrinsic value of the stock? If the stock is currently selling for $10.59, would you buy or sell the stock?

Reference no: EM133674324

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