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A firm is expecting a: $4 dividend to be paid to shareholders in one year (t=1); $6 dividend the year after (t=2); and from then on the 2% inflation rate is the expected growth rate of the annual dividend which will be paid annually forever; 10% pa required return on equity. All returns and cash flows are given as nominal figures. Which of the following statements is NOT correct?

a. The real growth in the annual dividend after year 2 is 0%

b. The capital return in the first year is 4.43% from time zero to just after the first dividend payment.

c. The price in one year from now (t=1), just after the $4 dividend is paid is $75.00

d. The price today is $71.82

e. The dividend return in the first year is 8.00%


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