Question
Assume that Camilles Jewelry Corp. recently paid an annual dividend of $2.00 per share (or D0) on its common stock. Because of exceptionally positive operating
Assume that Camilles Jewelry Corp. recently paid an annual dividend of $2.00 per share (or D0) on its common stock. Because of exceptionally positive operating results, the firm expects dividends to grow at a supernormal growth rate of 20% (or Gs) over the next three years. After the end of the three year supernormal growth period, dividend growth is expected to return to the firms normal rate of 6% (or Gn). The investors required return for Camilles Jewelry Corp. common stock is 12% (or Ke). Using the two-stage growth model solve for the firm's current stock price (or P0)
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