1. The Canning Company has been hit hard due to increased competition. The company's analysts predict that earnings (and dividends) will decline at a rate of 5% annually into the foreseeable future. Assume that ks = 11% and D0 = $2.00. What will be the price of the company's stock in three years?
Dividend in 3 years is:
"D3 = 2\u00d70.95^3 = 1.715."
Price in 3 years is:
"P3 = 1.715\/(0.11 + 0.05) = 10.72."
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