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Please answer if you are sure HighTech Company is expected to retain all of its earnings for the next two years but start to pay
Please answer if you are sure
HighTech Company is expected to retain all of its earnings for the next two years but start to pay dividends 3 years from today. The first dividend is expected to be $3. Assume that the dividends will grow rapidly at a rate of 10% per year during years 4 to 7. For each year after that it grows at a constant rate of 5%. Assume a discount rate of 12% a) What is HighTech's stock price? b) Assume that instead of growing at a 5% constant rate starting from year 8, HighTech Company expects, in year 8, to earn an EPS of $8 and reinvest $4 per share to develop new technology. The new technology will generate a 15% return permanently What is the constant growth starting from year 8? What is the stock price today given this constant growth rateStep by Step Solution
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