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In practice, a common way to value a share of stock when acompany pays dividends is to value the dividends over the next fiveyears or so, then find the “terminal” stock price using a benchmarkPE ratio. Suppose a company just paid a dividend of $1.15. Thedividends are expected to grow at 10 percent over the next fiveyears. The company has a payout ratio of 40 percent and a benchmarkPE of 19. The required return is 11 percent.a. What is the target stock price in five years? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)b. What is the stock price today? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g.,32.16.)
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