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Teaching Since: | Apr 2017 |
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Questions Answered: | 3232 |
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MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
Zweite Pharma is a fast-growing drug company. Management forecasts that in the next three years, the company’s dividend growth rates will be 30 percent, 28 percent, and 24 percent, respectively. Last week it paid a dividend of $1.67. Aft er three years, management expects dividend growth to stabilize at a rate of 8 percent. The required rate of return is 14 percent.
a. Compute the dividends for each of the next three years, and calculate their present value.
b. Calculate the price of the stock at the end of year 3, when the firm settles to a constant-growth rate.
c. What is the current price of the stock?
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