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In order to buy back its own shares, Pennzoil Co. Has decided to suspend its dividends for the next two years. It will resume its annual cash dividend of $2.00 a share 3 years from now. This level of dividends will be maintained for one more year. Thereafter, Pennzoil is expected to increase its cash dividend payments by an annual growth rate of 6% per year forever. Pennzoil’s beta is 1.0, the market return is 12% and the risk-free rate is 5 %. What should Pennzoil’s share price currently be?

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Hubert Koch
Hubert KochLv2
29 Sep 2019

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