Question 4. Stock valuation (2 points) a) Assume that a stock has the same dividend paid...

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Question 4. Stock valuation (2 points) a) Assume that a stock has the same dividend paid in perpetuity. Find the value of the

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Answer 1

Answer #1

a.

Value of Stock = 2/0.02

Value of Stock = $100

b.

Using Constant Growth Model,

Stock Value = 1(1.02)/(0.03 - 0.02)

Stock Value = $102

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Answer 2

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