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According to DVM growth formula answer should be. 0.50(1+0.03)/0.10-0.03 = 7.35
but the correct answer is 6.11. How???The formula gives the MV is the first dividend is in 1 years time.
Here the first growing dividend is in 3 years time and so the answer needs discounting.
Also, there is a dividend on 0.25 in 2 years time, so this needs discounting also and adding on to get the full MV.
If you watch my free lectures working through Chapter 15 of our free lecture notes I explain all this. Especially the lecture working through Example 7 in the chapter.
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