ABC Company has decided to make a major investment.The investment will require a substantial early cash outflow, and inflows will be relatively late.As a result, it is expected that the impact on the firm's earnings for the first 2 years will cause a negative growth of 5 percent annually.Further, it is anticipated that the firm will then experience 2 years of zero growth, after which it will begin a positive annual sustainable growth of 6 percent.If the firm's required return is 10 percent and its last dividend, D0, was R2 per share, what should be the current price per share?

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The Answer of ABC Company has decided to make a major investment.The investment will require a substantial early cash outflow, and inflows will be relatively late.As a result, it is expected that the impact on the firm's earnings for the first 2 years will cause a negative growth of 5 percent annually.Further, it is anticipated that the firm will then experience 2 years of zero growth, after which it will begin a positive annual sustainable growth of 6 percent.If the firm's required return is 10 percent and its last dividend, D0, was R2 per share, what should be the current price per share?

ABC Company Has Decided to Make a Major Investment