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Banana-X is a new firm, so it chooses to pay no dividends for the first 2 years because it plans to retain the cash for
Banana-X is a new firm, so it chooses to pay no dividends for the first 2 years because it plans to retain the cash for growth. In year three the firm will pay a dividend of $2 and will maintain it at this level for two years (years 3 and 4),. Starting in year 5, the firm will increase its dividend by 5% every year, forever. Assume the discount rate is 12%.
(a) Find the stock price today (b) Find the stock price at t=13 (c) Change the problem by setting your own terms (anything you want') and show me your answers.
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