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Suppose that NVIDIA Corporation (NVDA)stock is selling for $150.00. Analysts believe that the growth ratefor NVDA will be 20% next year, 30% for the following 4 years, 10%for the following two years, and thereafter the growth rate will be6% indefinitely. NVDA will pay a cash dividend of $.65 per sharenext year. Thereafter the dividend will grow by the same rate asthe company. Stockholders require a return of 16 percent onNVIDIA’s stock.

Required:

  1. Based on the above assumptions, determine theprice of NVIDIA’s common stock.
  2. Explain whether an investor should buy thestock.

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Jamar Ferry
Jamar FerryLv2
28 Sep 2019

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