Question
The Club Auto Parts Company has just recently been organized.It is expected to experience no growth for the next 2 years as it identifies its
The Club Auto Parts Company has just recently been organized.It is expected to experience no growth for the next 2 years as it identifies its market and acquires its inventory.However, Club will grow at an annual rate of 5% in the third and fourth years and, beginning with the fifth year, should attain a 10% growth rate which it will sustain thereafter.The last dividend paid was $0.50 per share.Club has a cost of capital of 12%.What should be the present price per share of Club common stock? And what should you do if it is currently selling at Rs.28
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