Question
Cats Galore Company is experiencing a severe slump in sales. They expect their dividends to decline at a rate of six percent for three years.
Cats Galore Company is experiencing a severe slump in sales. They expect their dividends to decline at a rate of six percent for three years. After three years, Cats Galore awaits completion of its new plant, and the efficiencies of the new plant will significantly reduce costs. Cats Galore anticipates the new plant will cause their dividends to increase at a constant rate of seven percent into the foreseeable future. Cats Galore just paid a dividend (Dividendyear0) of $3.80. Investors' required rate of return is 13 percent. What would an investor be willing to pay for this stock? Take your dividend calculations out three decimal places, and your final stock price round to the nearest penny.
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