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Calculate the present value of the growth opportunity

Winter Co. is expected to pay a dividend or $4.00 per share out of earnings of $7.50 per share. If the required rate of return on the stock is 15% and dividends are growing at a current rate of 10% per year, calculate the present value of the growth opportunity for the stock (PVGO)

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## Q : Estimation of required rate of return

The current dividend yield on Clayton's Metals common stock is 3.2 percent. The company just paid a $1.48 annual dividend and announced plans to pay $1.54 next year.