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? Use the dividend values provided in the table below for your calculations. Do not round your intermediate calculations.
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
| Growth rate | NA | NA | NA | NA | 90.00% | 40.00% | 8.00% |
| Dividends | $0.0000 | $0.0000 | $0.0000 | $0.2500 | $0.4750 | $0.6650 | $0.7182 |
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Behavioral Finance And Wealth Management
Authors: Michael M. Pompian
2nd Edition
1118014324, 978-1118014325
