Ten years ago, Video Toys began manufacturing and selling coin-operated arcade games. Dividends are currently $1.50 per

Question:

Ten years ago, Video Toys began manufacturing and selling coin-operated arcade games. Dividends are currently $1.50 per share, having grown at a 15 percent comp0und annual rate over the past five years. That growth rate is expected to be maintained for the next three years, after which dividends are expected to grow at half that rate for three years. Beyond that time, Video Toys’s dividends are expected to grow at 5 percent per year. What is the current value of a share of Video Toys if your required rate of return is 18 percent?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...