Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the...
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Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 12 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $6 per share dividend in 13 years and will increase the dividend by 3 percent per year thereafter.
Required: If the required return on this stock is 8 percent, what is the current share price? Note: find the price of the stock one year before the company starts paying a dividend, using the dividend growth model. Then find the PV of the price, using your TVM keys. (Do not round your intermediate calculations.)
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