Question
A)Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to
A)Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 23% per year - during Years 4 and 5, but after Year 5, growth should be a constant 10% per year. If the required return on Computech is 14%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent. $ B) A stock is expected to pay a dividend of $2.00 at the end of the year (i.e., D1 = $2.00), and it should continue to grow at a constant rate of 4% a year. If its required return is 15%, what is the stock's expected price 5 years from today? Do not round intermediate calculations. Round your answer to the nearest cent. $
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