Wednesday 25 June 2014
The MM Company has fallen on hard times. Its management expects to pay no dividends for the next 2 years.
The MM Company has fallen on hard times. Its management expects to pay
no dividends for the next 2 years. However, the dividend for Year 3 (D3)
will be $1.00 per share, and it is expected to grow at a rate of 3% in
Year 4, 6% in Year 5, and 10% in Year 6 and thereafter. If the required
return for MM Co. is 20%, what is the current equilibrium price of the
stock?
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