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Warf Co. just paid a dividend of $4.00 per share. The company will increase its dividend...

Warf Co. just paid a dividend of $4.00 per share. The company will increase its dividend
by 20 percent next year and will then reduce the dividend growth rate by 5 percentage
points per year until it reaches the industry average of 5 percent, after which the
company will keep that 5 percent constant growth rate, forever. If the required return on
Warf stock is 13 percent, what will a share of stock sell for today?
In a DCF analysis, we often estimate the terminal value of a firm or project using a
growing perpetuity. Is it possible that firms with good management could have higher
growth rate than the market or industry average growth rate forever? Why or why not

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