Perry, Inc., paid a dividend of $2.50 yesterday. You are interested in investing in this company, which has forecasted a constant-growth rate of 7 percent for its dividends, forever. The required rate...

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Perry, Inc., paid a dividend of $2.50 yesterday. You are interested in investing in this company, which has forecasted a constant-growth rate of 7 percent for its dividends, forever. The required rate of return is 18 percent.
a. Compute the expected dividends D 1 , D 2 , D 3 , and D 4 .
b. Compute the present value of these four dividends.
c. What is the expected value of the stock four years from now (P4)?
d. What is the value of the stock today based on the answers to parts b. and c.?
e. Use the equation for constant growth (Equation 9.4) to compute the value of the stock today.

Answered Same Day Dec 23, 2021

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Robert answered on Dec 23 2021

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Perry, Inc., paid a dividend of $2.50 yesterday. You are interested in investing in this company, which has forecasted a constant-growth rate of 7 percent for its dividends, forever. The required rate...

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