Church Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects sales and dividends to grow at a rate of 25% for the next 4 years, after which competition will probably reduce the growth rate in sales and dividends to zero, i.e., g = 0. The company’s last dividend, D0, was $1.25, required rate of return on the stock is 9.60%. What is the current price of the common stock?
Formula and Answer.