A firm plans to begin paying a constant annual dividend of $1.50 a share beginning five years from now. If you require a rate of return of 7%, what is the most that you would be willing to pay for a share of this stock today?

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21. Over the past 10 years, the dividends of Party Time, Inc. have grown at an annual rate of 10%. The current dividend (D0) is $2.5 per share. The dividend is expected to grow to $2.75 next year, then grow at an annual rate of 8% for the following two years and 9% per year thereafter. You require a 25% rate of return on this stock. What would you be willing to pay for a share of Party Time stock today?

A. $14.34

B. $10.00

C. $16.93

D. $20.05

crimsoncrow863

Diets For You announced today that it will begin paying annual dividends next year. The first dividend will be $0.12 a share. The following dividends will be $0.15, $0.20, $0.50, and $0.75 a share annually for the following 4 years, respectively. After that, dividends are projected to increase by 4 percent per year. How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent?

Diets For You announced today that it will begin paying annualdividends next year. The first dividend will be $1.25 a share. Thefollowing dividends will be $0.25, $0.25, $0.50, and $0.75 a shareannually for the following 4 years, respectively. At the end of thefifth year, the stock could be sold for $18. How much are youwilling to pay to buy one share of this stock today if your desiredrate of return is 8.5 percent?

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