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Microsoft just announced it is increasing its annual dividend to $1.68 next year and will increase that dividend by 1.85 percent annually thereafter. How much will one share of this stock be worth ten years from now if the required rate of return is 10 percent

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tutorAnne

Answer: Stock Value  ten years from now  = $24.76 per share

Explanation:

To find the stock worth, we Use the formula of the Dividend valuation model,which is  

Po = Do x (1+g)^n  / (r-g)

where

Po = Stock value

n =  10 years  

g = 1.85%

Do = Dividend $1.68

r = 10%

Po = 1.68  x (1+1.85%)^10  / (10% - 1.85%)

1.68  x 1.201182 / (10% - 1.85%)

2.0179876 / (10% - 1.85%)

2.0179876 / 0.0815

Po = $24.76 per share

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