Question
Flames Corp.s most recent dividend paid was $1.25/share. Analysts are bullish on Flames Corp. and expect that the company could see a period of abnormally
Flames Corp.s most recent dividend paid was $1.25/share. Analysts are bullish on Flames Corp. and expect that the company could see a period of abnormally large growth in the dividend for the next 5 years. The consensus expectation is that the dividend will grow by 12% per year through the next 5 years. At that time, they believe Oiler Ltd. may have established itself as a viable competitor and Flames Corp.s dividend growth with stabilize at 3% per year. According to the DDM, what is the value of a share of Flames Corp. stock if the firms equity cost of capital is 9%?
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