Samantha Feels That XYZ Corporation Is Currently a High Growth

question 73

Essay

Samantha feels that XYZ corporation is currently a high growth corporation. She expects dividend payments to rise by 30% each year for the next 2 years. After that, she expects dividends to remain constant for perpetuity. Next year, dividends will be $1.00. Samantha's appropriate discount rate is 12% for this investment option. Based on Samantha's expectations, what price is she willing to pay to receive the flow of dividends? If the stock is currently trading for $11, should she purchase the stock to capture the dividend stream?

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Definitions:

Tooth

A hard, calcified structure found in the jaws of many vertebrates, used for biting and chewing food.

Pepsin

An enzyme produced in the stomach that initiates digestion of protein.

Polypeptides

Chains of amino acids linked by peptide bonds, serving as the building blocks for proteins.

Proteins

Proteins are large, complex molecules essential for the structure, function, and regulation of the body's cells, tissues, and organs.