Find the market-implied total required return on equity of buying a $90 stock now that's...
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Find the market-implied total required return on equity of buying a $90 stock now that's expected to pay annual dividends forever, with the next $10 dividend to be paid in one year (t=1). The dividend is expected to grow forever at -5% per annum (note the negative sign). Therefore the second dividend (paid at t=2) is expected to be $9.5 (=(10*(1+-0.05)^1). Assume that the stock can be accurately valued with the DDM. The stock's market-implied total required return on equity is: Question 2
Select one: a. -10% pa b. -3.888889% pa c. 1.111111% pa d. 6.111111% pa e. 10% pa
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