Agarwal Technologies was founded 10 years ago. It has been profitable for the last 5...
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Agarwal Technologies was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay a $0.25 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter. Management's forecast of the future dividend stream, along with the forecasted growth rates, is shown below. Assuming a required return of 11.00%, what is your estimate of the stock's current value? Use the dividend values provided in the table below for your calculations. Do not round your intermediate calculations.
Year
0
1
2
3
4
5
6
Growth rate
NA
NA
NA
NA
60.00%
30.00%
8.00%
Dividends
$0.000
$0.000
$0.000
$0.250
$0.400
$0.520
$0.56
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