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NEW QUESTION: 1
Consider the following annual growth forecasts for a common stock:
Growth in years 1-2 = 25%
Growth in years 3-4 = 15%
Growth after year 4 = 10%
Assuming that the last dividend was $1.30 per share, and that the required rate of return is 14% per year, what is the value of this common stock?
A. None of these answers is correct.
B. The answer cannot be determined from the information provided.
C. $34.54
D. $28.28
E. $49.90
F. $46.90
Answer: E
Explanation:
Explanation/Reference:
Explanation:
To determine the value of a common stock experiencing temporary supernormal growth, use the following equation:
{V = {[d0 * (1 + gs)