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Example 7.5 Valuing a Firm with Two Different Growth Rates (1 of 6) Problem Small Fry, Inc., has just invented a potato chip that looks

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Example 7.5 Valuing a Firm with Two Different Growth Rates (1 of 6) Problem Small Fry, Inc., has just invented a potato chip that looks and tastes like a french fry. Given the phenomenal market response to this product, Small Fry is reinvesting all of its earnings to expand its operations. Earnings were $2 per share this past year and are expected to grow at a rate of 20% per year until the end of year 4. At that point, other companies are likely to bring out competing products. Analysts project that at the end of year 4, Small Fry will cut its investment and begin paying 60% of its earnings as dividends. Its growth will also slow to a long- run rate of 4%. If Small Fry's equity cost of capital is 8%, what is the value of a share today

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