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Determining the price of the stock

Problem: EZee Enterprises' common stock dividend is expected to grow at 5% for the next 2 years and then at 0% indefinitely. If the current dividend is $4 and the required return is 14%, what is the price of the stock rounded to the nearest dollar?

A) $31

B) $24

C) $28

D) $41

E) $43

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Finance Basics: Determining the price of the stock

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Determining the price of the stock

Reference No:- TGS01451857

Have a Question? (oR Write a Review)

Recent Questions Asked Finance Basics

Q : Calculate the firms liquidity ratios for each year

Q : Present value of infows approach

Q : Present value of all the cash flow

Q : Account the risk of bankruptcy

Q : Determining the price of the stock

Q : Direct reduction of cash

Q : Effect of reducing taxes and increasing cash flows

Q : Example of an indirect agency cost

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Determining the price of the stock

Reference No:- TGS01451857

Recent Questions Asked Finance Basics

Q : Calculate the firms liquidity ratios for each year

Q : Present value of infows approach

Q : Present value of all the cash flow

Q : Account the risk of bankruptcy

Q : Determining the price of the stock

Q : Direct reduction of cash

Q : Effect of reducing taxes and increasing cash flows

Q : Example of an indirect agency cost

Q : Riskiness and relative uncertainty of flows

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