Suppose Matt invests in a company that recently paid $2 annual dividend. The company is projecting that its dividends will grow by 20%, 15%, and 10%, respectively, for the next 3years. Thereafter, dividends will grow at 6% each year. The required rate of return on this stock is 14%. How much should the stock sell for today?

Step : Compute the PV of dividends during Part I:

Step : Compute the value of dividends during Part II and then discount this value to the present.

Step = +