Question
Valuing Common Stock with Nonconstant Growth, which demonstrates a case where a company pays dividend [Do] of $2.00 this year, and increase the dividend amount
Valuing Common Stock with Nonconstant Growth, which demonstrates a case where a company pays dividend [Do] of $2.00 this year, and increase the dividend amount at a supernormal growth rate of g=30% for the next 3 years, and then back to the normal g=6% from year 4 till infinity. Now, based on this illustration, you are to calculate the stock value of another company if it pays nothing for the first 3 years [D1=D2=D3=$0.00], and then pays $2.00 at yr 4, and then at a supernormal growth rate of g=30% for yr5, yr 6, and yr7; and then back to the normal growth rate of g=6% from yr 8 on till infinity. Start with a timeline and show the full procedure to show your answer. the required return at 6%.
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