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Firm AAA's earnings and dividends are expected to grow by a rate of 0.02 a year. This growth will stop after year 4. In year 5 and later, it will pay out all earnings as dividends. Assume next year's dividend is 7, the cost of capital is 0.1, and next year's EPS is 15. What is AAA's stock price today? Round your answer to 2 decimal places.

Firm AAA's earnings and dividends are expected to grow by a rate of 0.02 a year. This growth will stop after year 4. In year 5 and later, it will pay out all earnings as dividends. Assume next year's dividend is 7, the cost of capital is 0.1, and next year's EPS is 15. What is AAA's stock price today? Round your answer to 2 decimal places.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Firm AAA's earnings and dividends are expected to grow by a rate of 0.02 a year. This growth will stop after year 4. In year 5 and later, it will pay out all earnings as dividends. Assume next year's dividend is 7, the cost of capital is 0.1, and next year's EPS is 15. What is AAA's stock price today? Round your answer to 2 decimal places.
Transcribed Image Text:Firm AAA's earnings and dividends are expected to grow by a rate of 0.02 a year. This growth will stop after year 4. In year 5 and later, it will pay out all earnings as dividends. Assume next year's dividend is 7, the cost of capital is 0.1, and next year's EPS is 15. What is AAA's stock price today? Round your answer to 2 decimal places.
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