Nonconstant growth: You own a company that competes with Old World DVD Company (in the previous problem). Instead of selling DVDs, however, your company sells music downloads online. Things are going well now, but you know that it is only a matter of time before someone comes up with a better way to distribute music. Your company just paid a $1.50 per share dividend, and you expect to increase the dividend 10 percent next year. However, you then expect your dividend growth rate to begin going down—to 5 percent the following year, 2 percent the next year, and −3 percent per year thereafter. Based on these estimates, what is the value of a share of your company’s stock?

Assume that the required rate of return is 12 percent.