Question 4:

You have invested in shares of Fett inc. The firm does not currently pay dividends; however, they expect to pay their first dividend of $6 per share in 3 years. For the next 2 years after (years 4 and

5), the dividend will grow by 20% each year. After this, the growth rate will be a constant 3% each year indefinitely. If the applicable cost of capital is 12%, what is the current price of a share of Fett stock?