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5. Suppose that Zoom Video Communications, Inc. (ZM) is selling for $120.00. Analysts believe that the growth rate for ZM will be 40% per
5. Suppose that Zoom Video Communications, Inc. (ZM) is selling for $120.00. Analysts believe that the growth rate for ZM will be 40% per year for the next three years, 20% per year for the following two years, and thereafter the growth rate will be 10% indefinitely. ZM's most recent cash dividend per share was $6.00. The dividend will grow by the same rate as the company. Stockholders require a return of 18 percent on ZSM's common stock. Required: a) Based on the above assumptions, determine the price of ZM's common stock. b) Explain whether an investor should buy the stock.
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