Question: Dividend flow has Multi-stage growing Pattern
Twitter Inc. is projected to grow at 50% per year for 3 years. By then, other companies will have similar service or technology, the competition will drive down its profit margin and the sustainable growth rate will fall to 4%. The most recent annual dividend was $1 per share. The required return of Twitter is 12%.
a. What are the expected values of D1, D2, D3 and D4?
b. What is the expected stock price 3 years from now?
c. What is the intrinsic value of this stock today?
d. What is the expected price of this stock one year later?