Question
Additional Non-Constant(Supernormal) Growth Stock Problem Thai One On, a national Thai restaurant chain, expects to see a 15% annual increase in dividends over the next
Additional Non-Constant(Supernormal) Growth Stock Problem
Thai One On, a national Thai restaurant chain, expects to see a 15% annual increase in dividends over the next three years. After that, analysts expect dividends to fall to a constant growth rate of 4% thereafter. Thai One On's last dividend paid was $1.65 per share. Also, since there will be a few more Thai chains popping up shortly, investors see some risk and require an annual return of 13.2%. Based on this information, what is the intrinsic value (current price per share) of Thai One On's stock? Hint: Follow the three steps. All work must be shown to receive credit.
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