The stock of Carroll’s Bowling Equipment currently pays a dividend (D0) of $3. This dividend is expected to grow at an annual rate of 16 percent for the next 3 years. The dividend is expected to increase by $1 in Year 4 and to grow at a constant annual rate of 8 percent thereafter. If you require a 20 percent rate of return on an investment such as this, how much would you be willing to pay per share? Use Table II to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent.

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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The stock of Carroll’s Bowling Equipment currently pays a dividend (D0) of $3. This dividend is expected to grow at an annual rate of 16 percent for the next 3 years. The dividend is expected to increase by $1 in Year 4 and to grow at a constant annual rate of 8 percent thereafter. If you require a 20 percent rate of return on an investment such as this, how much would you be willing to pay per share? Use Table II to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent.

 

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