Ch5

A research of a growth stock projects that the stock will experience five years of rapid growth and slower growth after that. Because of such, the company is expected to pay small dividends in the next five years with the current amount of $1.00 and 2% annual growth. After the five-year period, dividend growth will change to 5% per year. The required rate of return is about 6% a year.

If we have to use the two-period dividend growth model, specify the following values.

So, D_0 =

g_1 = %

g_2 = %

N =

k =