Question 45

5. Phillips, Inc. just paid a dividend of $3.25 per share on its common stock (that is, D0=3.25 ). Investors expect the dividend to grow at 45% in years 1 and 2 , they expect the dividend to grow at 25% in year 3 and they expect that all future dividends (that is, dividends in years 4,5,, infinity) to grow at a constant rate of 5% per year. If the cost of capital for Phillips, Inc. stock is 16%, what is the current price of the stock