Question
ABC Farm was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to
ABC Farm was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay $0.50 dividend 3 years from today, then to increase it at a relatively rapid annual rate for 2 years, and then to increase it at a constant rate of 8.00% every year thereafter. The forecast of the future dividend stream, along with the forecasted growth rates, is shown below.
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
| Growth rate | NA | NA | NA | NA | 50.00% | 25.00% | 8.00% thereafter |
| Dividend | $0 | $0 | $0 | $0.50 | $0.75 | $0.9375 | $1.0125 |
If the required annual return is 11.00%, what is the current value per share?
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