Apollo Inc paid a dividend last year of $1.50. Dividends are expected to grow at...
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Apollo Inc paid a dividend last year of $1.50. Dividends are expected to grow at a rate of 17% this year, 15% next year, 10% the following year and 5% thereafter. The required rate of return is 15%. Apollo is considering investing in a 15-year bond with a 5.5% coupon, interest paid semiannually. The current market interest rate is 6.5%, and the bond is priced at $940.
1) What is the price of the stock for Apollo Inc today?
2) What is the price of the stock for Apollo Inc 2 years from now?
3) What is the price of the stock for Apollo Inc 5 years from now?
4) Should Apollo purchase the bond? What is the maximum price they should pay for the bond?
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