Answered: 6) Save Ltd is expanding rapidly. Its… | bartleby

Corporate Fin Focused Approach

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 21P

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6) Save Ltd is expanding rapidly. Its dividend growth rate for the coming year is projected at 25%.
This rate will decline by 5% points per year until it reaches the industry average of 5%. Once it
reaches 5%, it will stay there indefinitely. The most recent dividend was $0.20 per share, and the
market requires a return of 16% on investment such as this one. What is the price per share for Save?

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