Calculate today’s stock price for APC Inc. (APC) if last period’s dividend was $2.48 and its dividend growth forever is expected to be 7% (assuming a required rate of return of 12%)?
If instead the dividend growth rate in the next three years is projected to be 21% in year 1, 14% in year 2, and 19% in year 3...then, after year 3, returning to its constant growth rate of 7%, what would you compute today’s price to be, again assuming a required return for shareholders to be 12%?