Finance Valuation of Stock : Compute the value of stock by ClassOf1

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									              Sub: Finance                                                                  Topic: Valuation of Stock



              Question:
              Compute the value of stock using Dividend Discount Model.
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              General Cereal common stock dividends have been growing at an annual rate of 7percent per
              year over the past 10 years. Current dividend (Do) is $1.70 per share. What is the current valve
              of a share of this stock to an investor who requires a 12 percent rate of return if the following
              conditions exist?

                   a. Dividends are expected to continue growing at the historic rate for the foreseeable
                      future.
                   b. The dividend growth rate is expected to increase to 9 percent pe
								
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