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Avatar manufacturing has decided to retain more of its earnings to help finance its growth. It...

Avatar manufacturing has decided to retain more of its earnings to help finance its growth. It will reduce its annual dividend by 20% a year for the next three years. After that it will maintain a constant dividend of $1.60 a share. Last year, the annual dividend was $2.60 a share. What is the market value of this stock if the required rate of return is 13%?

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Answer #1

The stock value is the present value of all future dividends

The stock value today = $12.02

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