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Sandhill Corp. paid a dividend of $2.24 yesterday. The company’s dividend is expected to grow at...

Sandhill Corp. paid a dividend of $2.24 yesterday. The company’s dividend is expected to grow at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like Sandhill require a rate of return of 17 percent, what should be the market price of Sandhill stock? (Round dividend to 3 decimal places, e.g. 3.756 and round final answer to 2 decimal places, e.g. 15.25.)

Market price

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Expert Solution

Market price = D0(1 + g) / (r - g)

Market price = $2.24(1 + 0.05) / (0.17 - 0.05)

Market price = $19.60

jeff jeffy answered 2 years ago
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