Suppose Sara invests in a company that recently paid $2 annual dividend. This amount of dividends will remain the same for the next 3 years. Thereafter, dividends will grow at 6% each year. The required rate of return on this stock is 14%. What is the current value of the stock?

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 = +