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Annie-Bell, Inc., has just invented hotdog/taco combo. Given the phenomenal market response to this product, Annie-Bell is reinvesting all of its earnings to expand its
Annie-Bell, Inc., has just invented hotdog/taco combo. Given the phenomenal market response to this product, Annie-Bell is reinvesting all of its earnings to expand its operations. Earnings were $5 per share this past year and are expected to grow at a rate of 30% per year until the end of year 3. At that point, other companies are likely to bring out competing products. Analysts project that at the end of year 3, Annie-Bell will cut its investment and begin paying 75% of its earnings as dividends. Its growth will also slow to a long-run rate of 5%. If Annie-Bells equity cost of capital is 9%, what is the value of a share today
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