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Non-Constant Growth Valuation: Divining Rod Water Resources Corp (DRWR) has experienced rapid growth that is expected to continue for the next several years. Specifically, high
Non-Constant Growth Valuation: Divining Rod Water Resources Corp (DRWR) has experienced rapid growth that is expected to continue for the next several years. Specifically, high growth of 25% for the next two years, followed by constant growth of 8% thereafter is expected. The most recent dividend was $2.50 and the required rate of return is 12%.
a. What is the intrinsic value of DRWRs stock?
b. Everything else the same, what is the intrinsic value of DRWRs stock if the high growth period lasts for 6 years, followed by constant growth thereafter?
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