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2) (35%) EFG Company is experiencing a rapid growth at the moment. It is estimated that the company will grow at a 20% (g) for
2) (35%) EFG Company is experiencing a rapid growth at the moment. It is estimated that the company will grow at a 20% (g) for the next three years and the growth rate (g2) will be 30% in year 4, and will remain at a growth rate of 6% (g3) thereafter (from year 5 and onward). If the required rate of the stock is 10%, and the current stock price is $50, calculate the followings. (a) Calculate the dividends of i) years 3, ii) year 4 and iii) year 5 (express all in terms of current dividend, Do). (b) Calculate the stock price in year 4 (P4) (express all in terms of current dividend, Do). (c) Calculate the current dividend (Do) using information in (a) and (b) above. (d) Calculate the year 1 dividend (D1). (e) Recalculate the stock price in $ for (i) year 4 (P4) and (ii) year 0 (Po)
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