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[answered] Beta Ltd just paid a dividend of $0.40 and dividends are pa


?Beta Ltd just paid a dividend of $0.40 and dividends are paid once a year. Dividends are expected to grow at 4% p.a. for each of the next five years and then to remain constant forever. Assume a required rate of return of 7% p.a., and that dividends are paid at the end of each year. Determine the fair value of Beta Ltd stock.?


a) Present Value of Cash flow upto year 5:

 

Year

 

Dividend Discount factor @ 7%

 

Present Value

 

1

 

0.42

 

0.935

 

0.39

 

2

 

0.43

 

0.873

 

0.38

 

3

 

0.45

 

0.816

 

0.37

 

4

 

0.47

 

0.763

 

0.36

 

5

 

0.49

 

0.713

 

0.35

 

1.84 b) Present...

 


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