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Part A. (25 marks)
(i) Mat Enterprises, a New Zealand owned company, common stock currently sells for
$22.50 per share. The companys executives anticipate a constant growth of 10 percent
and an end of year dividend of $2.
You are required to compute the following:
(a) What is Mats expected rate of return if she buys the stock for $22.50? (5 marks)
(b) What is the value of stock to Mat and if Mat requires a 17 percent return, should he
purchase the stock? (5 marks)
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