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An analyst for a small European investment bank is interested in valuing stocks by calculating the present value of its future dividends. He has compiled the following financial data for Ski, Inc.:
Note: Shareholders of Ski, Inc., require a 20% return on their investment in the high growth stage compared to 12% in the stable growth stage. The dividend payout ratio of Ski, Inc., is expected to be 40% for the next three years. After year 3, the dividend payout ratio is expected to increase to 80% and the expected earnings growth will be 2%. Using the information contained in the table, what is the value of Ski, Inc.'s, stock? A. $43.04. B. $71.38. C. $39.50. |