Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $$1\mathrm{.}00$ coming $3$ years from today. The dividend should grow rapidly $-$ at a rate of $17\%$ per year $-$ during Years $4$ and $5$; but after Year $5,$ growth should be a constant $7\%$ per year. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

Nonconstant growth

Year $3$ Dividend, D$3$ $$1\mathrm{.}00$

Supernormal growth rate, gs $17\mathrm{.}00\%$

Normal growth rate, gn $7\mathrm{.}00\%$

Required return, rs $18\mathrm{.}00\%$

$17\mathrm{.}00\%17\mathrm{.}00\%7\mathrm{.}00\%$

$0123456$

Dividends $00$ $$1\mathrm{.}00$

P$5$

Cash flows to common stockholders $00$

PV of cash flows to common stockholders

Stock Price, P$0$

Alternatively, using Excel NPV function:

Stock Price, P$0$

Formulas

$17\mathrm{.}00\%17\mathrm{.}00\%7\mathrm{.}00\%$

$0123456$

Dividends $00$ $$1\mathrm{.}0000$ #N$/$A #N$/$A #N$/$A

P$5$ #N$/$A

Cash flows to common stockholders $00$ #N$/$A #N$/$A #N$/$A

PV of cash flows to common stockholders #N$/$A #N$/$A #N$/$A #N$/$A #N$/$A

Stock Price, P$0$ #N$/$A

Alternatively, using Excel NPV function:

Stock Price, P$0$ #N$/$A

If the required return on Computech is $18\%,$ what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations.

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