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NEW QUESTION: 1
An fundamental analyst with Street Brothers asset management is considering shares of Polynomial Software Solutions, Inc., for possible investment. In her analysis, this investor has determined the following information:
The Company currently pays a $2.20 per share dividend, and this dividend is anticipated to grow at 13% annually. Additionally, the investor has assumed that she will be able to sell the stock for $125 per share at the end of four years. Similar investments have warranted a 15.25% per year required rate of return. What is the value of Polynomial Software Solutions?
A. $122.16
B. The Multiple Holding Period DDM will produce a nonsensical answer for this stock.
C. $79.23
D. $110.64
E. $71.89
Answer: C
Explanation:
Explanation/Reference:
Explanation:
The Multiple Holding Period form of the Dividend Discount Model takes the following form: {V = {[d1 / (1 + k)] + [d2 / (1 + k)