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.
please help solve and show steps. thanks
0 1 2 4 6 Year Growth rate Dividends NA NA $0.000 NA $0.000 3 NA $0.250 60.00% $0.400 5 30.00% $0.520 8.00% $0.562 90.000 $13.65 $11.87 $12.23 $13.30 $11.28Step by Step Solution
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