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Two-Stage DDM Suppose a mature Information Technology company has decided to increase dividends by 20% in one year and 25% in two years, 30% in
Two-Stage DDM
Suppose a mature Information Technology company has decided to increase dividends by 20% in one year and 25% in two years, 30% in three years. After that, the dividends will increase only at a rate of 4% per year indefinitely as the company is planning to reinvest a bigger portion of its Net Income into capital expenditures and R&D. If the current dividend is $5 (you missed payment) and the required return on equity is 14%, what is the maximum you would pay for this stock today?
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