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22. Better Mousetraps has come out with an improved product, and the world is beating a path to its door. As a result, the firm
22. Better Mousetraps has come out with an improved product, and the world is beating a path to its door. As a result, the firm project's growth is 20% per year for 4 years. By then, other firms will have copycat technology, competition will drive down profit margins, and the sustainable growth rate will fall to 5%. The most recent annual dividend was DIVo = $1 per share. Required: a) If the discount rate is 10%, what is the expected stock price 4 years from now? (3 marks) b) What is the stock price today? (4 marks) c) What will next year's stock price, P, be? (3 marks) d) What is the expected rate of return to an investor who buys the stock now and sells it in 1 year? (3 marks) Round your answers to 2 decimal places. Total marks for the question - 13 marks
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