7-16 Sparkle Jewelers expects to pay dividends (per share) of $0.60, $0.90, $2.40, and $3.50 during the next four years. Beginning in the fifth year, the dividend is expected to grow at a rate of 4 percent indefinitely. If investors require a 20 percent return to purchase Sparkle's stock, what is the current value of the company's stock?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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7-16 Sparkle Jewelers expects to pay dividends (per share) of $0.60, $0.90, $2.40, and
$3.50 during the next four years. Beginning in the fifth year, the dividend is expected to
grow at a rate of 4 percent indefinitely. If investors require a 20 percent return to
purchase Sparkle's stock, what is the current value of the company's stock?
Transcribed Image Text:7-16 Sparkle Jewelers expects to pay dividends (per share) of $0.60, $0.90, $2.40, and $3.50 during the next four years. Beginning in the fifth year, the dividend is expected to grow at a rate of 4 percent indefinitely. If investors require a 20 percent return to purchase Sparkle's stock, what is the current value of the company's stock?
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