Question
A corporation, still in its early growth stage, is not now paying a dividend. The company expects to begin to pay a dividend 10 years
A corporation, still in its early growth stage, is not now paying a dividend. The company expects to begin to pay a dividend 10 years from now, starting at $2 per year, then. After the annual dividend begins 10 years from now, it expects the dividend to grow at a rate of 1 percent per year, continuing to grow at that rate into the long run. The required rate of return for this company is 9 percent. What is the discounted value of this stock today? (Note: Not the value 10 years from now, but rather, the discounted value for today.) Show full work.
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