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X-Corp. just paid a dividend of $1.75. You expect its dividend payment to grow by: 20% this year, 12% in year 2, then 8% per
X-Corp. just paid a dividend of $1.75.
You expect its dividend payment to grow by:
20% this year,
12% in year 2, then
8% per year for years 3 & 4, after which
the dividends will grow at an expected rate of 3% into the foreseeable future.
Similar companies have a cost of equity capital of 14%.
QUESTION
What is the maximum price you would pay for this stock?
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