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3 December, 20:31

The recent dividend payout by IBM was $3.00. IBM's dividends are expected to grow about 6.5% per year. If your required rate of return is 17%. What is the expected stock price two years from now. Round the answer to the nearest integer

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  1. 3 December, 23:01
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    Answer for question:

    The recent dividend payout by IBM was $3.00. IBM's dividends are expected to grow about 6.5% per year. If your required rate of return is 17%. What is the expected stock price two years from now. Round the answer to the nearest integer " is as explained below.

    Explanation:

    1. the expected stock price two years from now = 3 * 1.065^3 / (0.17 - 0.065)

    the expected stock price two years from now = 34.51

    2. FV = 0, N = 8, PMT = 288, rate = 4%

    use PV funciton in Excel

    value at time 0 = 1939.03
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