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(Solution Library) Firm X just paid a dividend of $2.50 today. Suppose that the firm’s dividend is expected to grow at a rate of 18 percent per year for the

Question: Firm X just paid a dividend of $2.50 today. Suppose that the firm’s dividend is expected to grow at a rate of 18 percent per year for the next three years. After that, dividend growth is expected to slow to 3 percent per year and remain at that level into the foreseeable future. If Firm X’s required return on equity is 11 percent, estimate the intrinsic value of Firm X’s common shares today based on the two-stage growth model.

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