Question
Company is growing rapidly and currently retains all of its earnings (i.e., no dividends). If is expected that Company will begin paying a $1.00 dividend
Company is growing rapidly and currently retains all of its earnings (i.e., no dividends). If is expected that Company will begin paying a $1.00 dividend 3 years from today. The dividend will grow by 50% in years 4 and 5. Thereafter (year 6 and beyond), dividend growth is expected to be a constant 8% per year. If the required return for Company stock is 15%, what is the market price of Company stock?
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