You are an analyst with a big Wall Street firm in charge of valuing high-tech firms. You are currently analyzing a firm called Dalvi.com that specializes in pretending to make money. Dalvi.com is not currently profitable, but they have convinced you that they will eventually make money. Your projections, therefore, are that the firm will pay no dividends for the next 10 years. Eleven years from now, you expect its first dividend of $2 per share. Further, you expect dividends to increase at a rate of 25% per year for 3 years after that. At that point, you will then expect dividends to grow at 9% per year thereafter. If the stock is presently trading at $15 and you believe that a required rate return for this type of company is 14%, based on your estimated price and the current price, should you buy the stock?

Explain your anwser