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A stock will pay no dividends for the next 7 years. Then it will pay a...

A stock will pay no dividends for the next 7 years. Then it will pay a dividend of $8.56 growing at 4.53%. The discount rate is 10.1%. What should be the current stock price?

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Answer #1

- Stock will not pay a dividend for next 7 years

Dividend in year 8(D8) = $8.56

Growth rate of Dividend therafter(g) = 4.53%

Discount rate(ke) = 10.1%

Calculating the Current price of Stock:-

P0 = $78.36

So, the current stock price is $78.36

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