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2) Firm B is growing quickly. Dividends are expected to grow at a 25 percent rate for the next three years, with the growth rate
2) Firm B is growing quickly. Dividends are expected to grow at a 25 percent rate for the next three years, with the growth rate falling off to a constant 7 percent thereafter. The required return is 13 percent and the company just paid a dividend of $4.00 on its stock.
a) What is the dividend at year 4?
b) What is the stock price at year 3?
c) Figure out the current stock price based on both the stock price at year 3 and dividends at year 1 through 3?
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