Question
Microweb Company has never paid a dividend. But, this year the company expects to pay a dividend equal to $2.50 per share, and it plans
Microweb Company has never paid a dividend. But, this year the company expects to pay a
dividend equal to $2.50 per share, and it plans to continue paying this same dividend for the
following two years (a total of three years). After the $2.50 dividend is paid at the end of Year 3
(i.e., beginning in Year 4), the company expects the dividend to grow at a 3 percent rate, and this
growth rate will continue indefinitely. If investors require a 14 percent rate of return to purchase
the company's common stock, what should be the market value of Microweb's stock today?
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