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Eddi Din [679]
3 years ago
12

A stock just paid an annual dividend of $0.40 per share. The firm expects to increase the dividend by 20 percent per year for th

e next four years and 3 percent per year thereafter. The discount rate is 11 percent. Which one of these is correct regarding the two-stage growth formula?
Business
1 answer:
Anon25 [30]3 years ago
7 0

Answer:

12.78

Explanation:

Two stage dividend growth model enables us to identify dividend value by incorporating the effect of multiple growth rates. This model assumes that dividend will pass out through 2 stages of growth. In first stage the dividend grows at a constant rate to a specified time then dividend grows at a further rate.

= Do (1 + g) + D1 (1 +g) + D2 (1 +g) + D3 (1 +g) + D3 * (1 +g2) / (r - g2)

0.4 * 1.2 + 0.48 * 1.2 + 0.6 * 1.2 + 0.7 *1.2 + 0.83 * 1.03 / 11 - 3

= 12.78.

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Doubtful account

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Learn more doubtful account here :

brainly.com/question/15409074

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