Question
You are considering investing in Lotte Chemicals. Suppose Lotte Chemical is currently undergoing expansion and is not expected to change its cash dividend while expanding
You are considering investing in Lotte Chemicals. Suppose Lotte Chemical is currently undergoing expansion and is not expected to change its cash dividend while expanding for the next 4 years. This means that its current annual 2.50 dividend will remain for the next 4 years. After the expansion is completed, higher earnings are expected to result causing a 35% increase in dividends each year for 3 years. After these three years of 35% growth, the dividend growth rate is expected to be 5% per year forever. If the required return for Lotte Chemicals common stock is 17%, what is a share worth today?
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