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Carma Corp. currently pays a dividend of $0.85 per share. In addition, Carma’s market beta is...

Carma Corp. currently pays a dividend of $0.85 per share. In addition, Carma’s market beta is 2.2 when the risk free rate is 5% and the expected market premium is 7%.

Estimate the intrinsic value of Carma Corp. using the dividend discount model under each of the following separate assumptions:

a. The dividend is expected to last into perpetuity.

b. The dividend will be $0.95 next year and then will grow at a rate of 5% per year.

c.    The dividend will be $0.85 for the next four years and then will grow at a rate of 5%.

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