Metallica Bearing, Inc., is a young start-up company. No dividends will paid on the stock over the

Question:

Metallica Bearing, Inc., is a young start-up company. No dividends will paid on the stock over the next six years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a $9 per share dividend in year 7 and will increase the dividend by 5 percent per year thereafter. If the required return on this stock is 13 percent, what is the current share price?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...