Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 11 percent for the next three years, with the growth rate falling off to a constant 5.6 percent thereafter. If the required return is 9.9 percent and the company just paid a dividend of $5.09, what is the current share price?

HINT: To solve this problem you need to determine the present value of the dividends in the period of super-normal growth first and then use the constant dividend growth model to value the stock when the growth slows. The value determined under the constant dividend growth model is then discounted because you have determined what the value should be after the end of the supernormal growth period. Finally, add the two components together.

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