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  3. 4. erskine corporation does not pay any dividends

4. Erskine Corporation does not pay any dividends because it is expanding rapidly and needs...

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4. Erskine Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Erskine to begin paying dividends with the first (per share) dividend of $1.25 coming 2 years from today. The dividends should grow rapidly, at 60% per year, during years 3 and 4. After year 4, Erskine's dividends should grow at a more constant rate of 4% per year (i.e., Erskine's year 5 dividend will be 4% higher than year 4's dividend, and this exact trend will continue). If the required return (i.e. the expected return) on Erskine's stock is 11%, what is the best estimate of Erskine's (per share) stock value today? (9)

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