fweQuestion $4$

Dividend Discount Model

Synovec Corporation is growing quickly. Dividends are expected to grow at a rate of $30\%$ for

the next three years, with the growth rate falling off to a constant $7\%,$ thereafter. If the

required return is $13\%$ and the company just paid a dividend of $$2\mathrm{.}55,$ what is the current

share price?

Hint: This is a two$-$stage model using the DDM $($Gordon Growth Model$)$ for the terminal

value. You need to determine the present value of each dividends, and then add the present

value of the terminal value $($terminal value $=$ D$4/(1-$g$)).$ Note that the test I will not give you

so many hints.

Note: Enter your answer with two decimals and without the $ sign. That is$,$ if your answer is

$$50\mathrm{.}514$ then enter $50\mathrm{.}51.$