Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years.

Question:

Taussig Technologies (TTC) has been growing at a rate of 20% per year in recent years. This same supernormal growth rate is expected to last for another 2 years (g1 = g2 = 20%).
a. If D0 = $1.60, rs = 10%, and gL = 6%, then what is TTC’s stock worth today? What is its expected yield and its capital gains yield at this time?
b. Now assume that TTC’s period of supernormal growth is to last another 5 years rather than 2 years (g1 = g2 = g3 = g4 = g5 = 20%). How would this affect its price, yield, and capital gains yield? Answer in words only.
c. What will TTC’s yield and capital gains yield be once its period of supernormal growth ends?
d. Of what interest to investors is the relationship over time between yield and capital gains yield?

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