bAs companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby effecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the companys stock.

Consider the case of Portman industries.

Portman industries just paid a dividend of $3.12 a share. The company expects the coming year to be very profitable, and its divdend is expected to grow by 12.00% over the next year. After the next year, though, Portmans dividend is expected to grow at a constant rate of 2.40% per year.

The risk-free rate (r_RF) is 3.00%, the market risk premium (RP_M), is 3.60%, and Portmans beta is 1.90.

Term	Value
Dividends one year from now (D1)	a. $3.5783 b. $3.6642 c. $3.4944 d. $4.0077
Horizon Value (P1)	a. $36.36 b. $46.97 c. $48.10 d. $149.10
Intrinsic Value of Portman's stock	a. $53.37 b. $56.36 c. $46.97 d. $43.79

What is the expected dividend yield for Portman's stock today?

a. 7.44%

b. 5.95%

c. 7.26%

d. 7.98%