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Central Inc.has an 11.5% required rate of return.It does not expect to initiate dividends for 20 years,at which time it will pay $3.75 per share in dividends.At that time,Central expects its dividends to grow at 6% forever.What is an estimate of Central's price in 20 years (P20)if its dividend at the end of year 20 is $3.75? What is its price in today's dollars if you desire a rate of return of 12%?
Convertible Bond
An investment vehicle that offers the ability to be exchanged for a set portion of the company's shares at predefined periods within its term, usually upon the bondholder's initiative.
Call's Value
The intrinsic value of a call option, reflecting the difference between the underlying asset's price and the strike price of the option, if positive.
Exercise Price
The price at which the holder of an option can buy (call) or sell (put) the underlying asset or security.
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