Question
6. Assume that the average firm in your companys industry is expected to grow at a constant rate of 7 percent and its dividend yield
6. Assume that the average firm in your companys industry is expected to grow at a constant rate of 7 percent and its dividend yield is 8 percent. Your company is about as risky as the average firm in the industry , but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 40 precent ( D1= D0(1+g)= D0=(1.40). this year and 20 percent the following year, after which growth should match the 7 percent industry average rate. The last dividend paid (D0) was$1. What is the current value per share of your firms stock?
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