Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Common stock value—Variable growth  Personal Finance Problem   

Home Place​ Hotels, Inc., is entering into a​ 3-year remodeling and expansion project. The construction will have a limiting effect on earnings during that​ time, but when it is​ complete, it should allow the company to enjoy much improved growth in earnings and dividends. Last​ year, the company paid a dividend of ​$2.20. It expects zero growth in the next year. In years 2 and​ 3, 4​% growth is​ expected, and in year​ 4, 22​% growth. In year 5 and​ thereafter, growth should be a constant 12​% per year. What is the maximum price per share that an investor who requires a return of 15​% should pay for Home Place Hotels common​ stock?

 

The maximum price per share that an investor who requires a return of 15​% should pay for Home Place Hotels common stock is

​($enter your response here.)  (Round to the nearest​ cent.)
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