Problem:
The Bell Weather Co. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 18 percent a year for the next 4 years and then decreasing the growth rate to 3 percent per year. The company just paid its annual dividend in the amount of $2.50 per share.
Required:
Question: What is the current value of one share of this stock if the required rate of return is 8.00 percent?
- $73.39
- $88.43
- $99.85
- $102.35
- $85.93
Note: Show all workings.