Assume that you are using the dividend discount model (the Gordon Model) to value stock. The stock currently pays no dividends, but expected to begin paying dividends $3 per share in four years.
Suppose the stock is expected to grow at a rate of 5% for the next six years that it started paying dividends, then slows to a long term growth rate of 3.5%, how much is that stock worth today?
A) >$35
b) <$20
c) $25-$30
D) $30-$35
E) $20-$25