Problem:
Peterson Packaging Incorporated does not currently pay dividends. The company will start with a $0.60 dividend at the end of year three and grow it by 10% for each of the next six years. After six years of growth, it will fix its dividend at $1.18 forever.
Required:
Question: If you want a 13% return on this stock, what should you pay today, given this future dividend stream?
Note: Show supporting computations in good form.