Example 8.5: Two-Stage Growth The Highfield Company is going through a period of fast growth. You want to know the current value of the stock price and have gathered the following information: Initial growth rate: Years of initial growth rate: Second growth rate (perpetual): Required return: Dividend just paid: 20.0% 5 4.00% 10.00% $ 2.00 95 First, we need to find the stock price when the dividends achieve a constant growth rate forever, which will be: 96 07 The stock price in Year 5 will be: $ 86.26 98 99 So, the stock price today is: 100 201 Stock price today: 102