Problem:
Longhorn, Inc. is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 25 percent a year for the next three years and then decreasing the growth rate to 6 percent per year. The company just paid its annual dividend in the amount of $0.80 per share.
Required:
Question: What is the current value of one share of this stock if the required rate of return is 17 percent?
Note: Please provide reasons to support your answer.