Your company cannot afford to pay any dividends for the first 3 years. And then...
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Your company cannot afford to pay any dividends for the first 3 years. And then it starts to pay a dividend of $2.00 at Yr 4; and then increasing its dividend for the next 3 years, 5th 6th 7th years at a supernormal growth rate of 30%, and then eventually the company is expected to come down to pay dividends at a constant normal growth rate of 6% every year from the 8th year on till infinity. What should be your company stock price now?
Solve the problem with a full time-line and analysis.
Valuing Common Stock with Nonconstant Growth Do = $2.00. 2 3 4 rs = 13% 1 + g= 30% g = 30% g = 30% ig= 6% 2.600 3.380 4.394 4.658 2.301 2.647 3.045 46.114 54.107 = P. 4.658 , = =$66.54 0.13-0.06
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