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April 21, 2014

Homework Help: Finance

Posted by Anonymous on Monday, October 6, 2008 at 7:38pm.

Faulkner Corporation expects to pay an end-of-year dividend, D1, of $1.50 per share. For the next two years the dividend is expected to grow by 25 percent per year, after which time the dividend is expected to grow at a constant rate of 7 percent per year. The stock has a required rate of return of 12 percent. Assuming that the stock is fairly valued, what is the price of the stock today?

a. $46.00
b. $40.20
c. $37.97
d. $36.38
e. $45.03

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