Assume ABC Corp. pays the dividend of $5.60 this year. For the next 25 years, the firm's dividend will grow by 5.2%, then it will grow by 4.6% each year afterwards. The required rate of return for the firm's industry is 11.1%. What is the present value of the firm's stock under the Dividend Discount Model?

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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Assume ABC Corp. pays the dividend of $5.60 this year. For
the next 25 years, the firm's dividend will grow by 5.2%, then it
will grow by 4.6% each year afterwards. The required rate of
return for the firm's industry is 11.1%. What is the present
value of the firm's stock under the Dividend Discount Model?
O $97.36
O $96.58
O $17.03
O $91.02
Transcribed Image Text:Assume ABC Corp. pays the dividend of $5.60 this year. For the next 25 years, the firm's dividend will grow by 5.2%, then it will grow by 4.6% each year afterwards. The required rate of return for the firm's industry is 11.1%. What is the present value of the firm's stock under the Dividend Discount Model? O $97.36 O $96.58 O $17.03 O $91.02
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