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Rocket Co. has just paid a dividend of $1.15 per share. The firm pays annual dividends....

Rocket Co. has just paid a dividend of $1.15 per share. The firm pays annual dividends. It is expected by analysts that the firm's earnings will grow by 8.2% per year over next six years. After that, the earnings will most likely grow at the current industry average of 5.5% per year. Analysts do not expect any changes in the payout ratio of the firm. The cost of capital is 12%. The today’s share price is closest to (nearest cents):

Select one: a. $19.67 b. $21.30 c. $20.51 d. $23.12

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Expert Solution

Todays share price is closest to $21.30

Answer is choice (b)

Details of calculation as below:

jeff jeffy answered 1 year ago
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