Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be constant at41.00% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price?

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Answered: Orwell building supplies' last dividend…

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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Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be constant at 41.00% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs ) is 12%. What is the best estimate of the current stock price?