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Maximum price you would be willing to pay for a shareVALUATION OF COMMON STOCK:
Spendex Corporation currently (time 0) pays a dividend of $1
per share on its common stock. Dividends are expected to grow at 10 percent per
year for the next three years, then at 8 percent per year in the following two
years, after which the growth in dividends should remain constant at 5 percent.
As an investor you require a 15 percent rate of return on this equity investment.
What is the maximum price you would be willing to pay for a share of Spendex?