Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $1 per sharedividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2years. After the third year (in which dividends are $3 per share), dividend growth is expected to settle down to a more moderate long-term growth rate of 8%. If the firm's investors expect to earn a returnNote: Do not round intermediate calculations. Round your answer to 2 decimalof 20% on this stock, what must be its price?places.

Dividend paid a year from now = D1 = $1 per shareDividend increase = $1 for each of the other 2…

Answered: cy. Today, it announced nds to increase…

Business

Finance

cy. Today, it announced nds to increase by $1 a to settle down to a ma at must be its price?

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

Section: Chapter Questions

Problem 1PS

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Question

Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $1 per share
dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2
years. After the third year (in which dividends are $3 per share), dividend growth is expected to settle down to a more moderate long-
term growth rate of 8%. If the firm's investors expect to earn a return
Note: Do not round intermediate calculations. Round your answer to 2 decimal
of 20% on this stock, what must be its price?
places.

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