Question
2 Bokkes management anticipates that, after five years of paying a constant dividend of R2 per year, they will be able to secure new markets.
2 Bokkes management anticipates that, after five years of paying a constant dividend of R2 per year, they will be able to secure new markets. Management thus feels that, commencing with the dividend in year 6, dividends should grow at a rate of 20% per annum for two years (i.e., in years 6 and 7); then there should be 18% growth for one year (i.e., in year 8), settling down thereafter to a constant growth of 10% per annum indefinitely. The required return has increased to 20% per annum. You are required to calculate the price of Bokkes shares today
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