You are considering buying stock in Bergkamp Mining. Its most recent dividend is $3.60 and its dividends have grown at an average annual rate of 4% over the last 10 years. However, the annual dividend growth has been as low as 1% in some years and as high as 6%. You want a 12% return from this stock. Round your answers to two decimals. What is the highest price you would pay for a share if you believe dividends will grow at 1%? What is the highest price you would pay for a share if you believe dividends will grow at 6%?
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Given D0 = $3.60 and r = 12% = 0.12. Show more…
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