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A corporation has not paid dividend in the past and does not plan to do so for the next year, i.e., D1=0. Due to its
A corporation has not paid dividend in the past and does not plan to do so for the next year, i.e., D1=0. Due to its growth potential, investors expect the company to start paying dividends in year 2. They expect the dividends for year 1 to year 3 to be $0, $2.6 and $6.3 and all the subsequent dividends to growth at 3% annual rate indefinitely. Investors require 11% of return on their investments as risky as this stock. What is the fair value of the stock today? Round your calculations to the nearest $0.01, i.e., two decimal places.
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