alleryStart learning →Last dividend Rs 2 grows 10% for 2 years, then 5% forever. At 15% required return, the value is closest to?
ARs 25.41
BRs 22.96
CRs 19.21
DRs 28.40
Answer & Solution
Correct answer: B. Rs 22.96
PV of D1 2.20 and D2 2.42 is about 1.91 + 1.83, and the year-2 terminal value 2.42 x 1.05 / 0.10 = 25.41 discounts to 19.21, totalling about Rs 22.96.
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