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NEW QUESTION: 1
Consider the following annual growth forecasts for a common stock:
Growth in years 1-2 = 30%
Growth in years 3-4 = 20%
Growth after year 4 = 15%
Assuming that the last dividend was $0.80 per share, and the required rate of return is 17.5% per year, what is the value of this common stock?
A. $47.05
B. $58.12
C. $50.87
D. None of these answers is correct.
E. $61.78
F. $43.59
Answer: C
Explanation:
Explanation/Reference:
Explanation:
To determine the value of a common stock experiencing temporary supernormal growth, use the following equation:
{V = {[d0 * (1 + gs)