Question
QUESTION 8 Suppose company X just announced a new cancer medicine that passed a double-blind test and was ready for sale. Given this news, their
QUESTION 8
Suppose company X just announced a new cancer medicine that passed a double-blind test and was ready for sale. Given this news, their expected growth rate for the next 5 years went up to 10%. They just paid out a dividend of $2. Your expectation of their perpetual growth rate after this super-growth period is 4%. Your required rate of return is 8%. How much should you be willing to pay for their stock?
Hint: Always keep four decimals for any of your between steps.
(keep four decimals; don't use thousands separator; don't use dollar sign)
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