Question
Agarwal Technologies was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to
Agarwal Technologies 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 a $0.25 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter. Management's forecast of the future dividend stream, along with the forecasted growth rates, is shown below. Assuming a required return of 11.00%, what is your estimate of the stock's current value?
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
| Growth rate | NA | NA | NA | NA | 30.00% | 15.00% | 8.00% |
| Dividends | $0.000 | $0.000 | $0.000 | $0.250 | $0.325 | $0.374 | $0.404 |
| $8.60 |
| $9.29 |
| $10.50 |
| $9.21 |
| $10.75 |
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Health Care Finance Basic Tools For Nonfinancial Managers
Authors: Judith Baker
2nd Edition
0763726605, 9780763726607
