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Two Timing Company has paid the following dividends on its common stock for the last 6 years (including the current year, year 0): Year Dividends
Two Timing Company has paid the following dividends on its common stock for the last 6 years (including the current year, year 0):
Year Dividends
-5 $ 1.00/share
-4 $ 2.20
-3 $ 1.50
-2 $ 1.50
-1 $ 1.50
0 $ 5.00
Because of a weak economy, management expects future growth in dividends to only be at one twentieth (1/20) of the average rate over the last 5 years. If investors require a 20% rate of return, what would be its current price?
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