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Given the information in the table, what is the price of the stock in YEAR 1? Today's Dividend $3
Given the information in the table, what is the price of the stock in YEAR 1?
Today's Dividend $3.60
Discount Rate 8.38%
Growth rate in dividends 0 to 1 9.82%
Growth rate in dividends 1 to 2 6.23%
Growth rate in dividends 2 to 3 6.91%
Growth rate in dividends 3 onward 3.35%
Expert Solution
Computation of the stock price in year 1 (P1):-
P1 = P0*(1+Growth rate in year 1)
= $83.22*(1+9.82%%)
= $91.39
Hence, the stock price in year 1 (P1) = $91.39
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