Calculate the value of the stock with different growth rates


Question: Non constant growth Selfotech Corporation is expanding quickly and currently needs to retain all of its earnings; hence it does not pay dividends. However, investors expect Selfotech to begin paying dividends, starting with a dividend of $1.00 coming three years from today. The dividend should grow rapidly - at a rate of 16% every year - during Years four and five, but after Year 5 growth should be a constant 4% per year. If the required return on Selfotech is 14 percent, Calculate the value of the stock today? [Give your answer to the nearest hundredth.]

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Finance Basics: Calculate the value of the stock with different growth rates
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