Stephanie requires a return of at least 9% on her stock investments. Think-Local Inc. paid $0.75 per share as dividend last year (t = 0). The company expects that it will take next 2 years (till t = 2) to recover from the pandemic’s effects, during which time, its dividend will grow at a rate of 1.5% per annum. From year 3 onwards, the dividend growth rate is expected to settle at 2% per year indefinitely. What is the price that Stephanie will pay for stock at Think-Local Inc.?

Stephanie requires a return of at least 9% on her stock investments. Think-Local Inc. paid $0.75 per share as dividend last year (t = 0). The company expects that it will take next 2 years (till t = 2) to recover from the pandemic’s effects, during which time, its dividend will grow at a rate of 1.5% per annum. From year 3 onwards, the dividend growth rate is expected to settle at 2% per year indefinitely. What is the price that Stephanie will pay for stock at Think-Local Inc.?

Name: Stephanie requires a return of at least 9% on her stock investments.
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Description: Stephanie requires a return of at least 9% on her stock investments. Think-Local Inc. paid $0.75 per share as dividend last year (t = 0). The company expects that it will take next 2 years (till t = 2) to recover from the pandemic’s effects, during

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 24P

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Stephanie requires a return of at least 9% on her stock investments. Think-Local Inc. paid $0.75 per share as dividend last year (t = 0). The company expects that it will take next 2 years (till t = 2) to recover from the pandemic’s effects, during which time, its dividend will grow at a rate of 1.5% per annum. From year 3onwards, the dividend growth rate is expected to settle at 2% per year indefinitely. What is the price that Stephanie will pay for stock at Think-Local Inc.? Please break down all the steps
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