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Please help asap! Dawn Corp. is a fast-growing firm specializing in night vision devices. Your friend was just telling you that you should jump on

Please help asap!

Dawn Corp. is a fast-growing firm specializing in night vision devices. Your friend was just telling you that you should jump on it as Dawn is a good deal at $63.5. You decide to calculate yourself the fair value of one share of Dawn, so you can judge for yourself whether the current price is undervalued, overvalued, or fair.

Dawn just paid a $1.8 dividend per share. The dividends are expected to grow by 7% each year for 2 years (i.e., till year 2), then by 5% each year for the following 2 years (i.e., year 3 and year 4). From year 5 on, dividends are expected to grow at 3% for the foreseeable future. The required rate of return/discount rate is 6%.

Based on your calculation regarding the fair value of the stock, will you buy the stock? 8 points


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