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Magnetic Corporation expects dividends to grow at a rate of 17.2% for the next two years....

Magnetic Corporation expects dividends to grow at a rate of 17.2% for the next two years. After two years dividends are expected to grow at a constant rate of 5%, indefinitely. Magnetic’s required rate of return is 14.1% and they paid a $1.18 dividend today. What is the value of Magnetic Corporation’s common stock per share? (Show your answers to the nearest cent)

Dividend at end of year 1:

Dividend at end of year 2:

Dividend at end of year 3:

Price of stock at end of year 2:

Price of stock today:

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Answer #1

B70 - X fx =+B69*1.05 A B A C PVIF @ 14.1% D Present value 67 0.876 $ 1.21 0.768 $ 1.24 68 D1 69 D2 70 D3 71 Stock price in 2

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