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Question
Assume that the average firm in your company's industry is expected to grow at a constant rate of 5 percent, and its dividend yield is 4 percent. Your company is about as risky as the average firm in the industry, but it has just developed a line of innovative new products which leads you to expect that its earnings and dividends will grow at a rate of 40 percent [ 
= D0(1 + g) = D0(1.40)] this year and 25 percent the following year, after which growth should match the 5 percent industry average rate. The last dividend paid (D0) was $2. What is the value per share of your firm's stock?
a. $42.60
b. $82.84
c. $91.88
d. $101.15
e. $110.37
Answer
This answer is hidden. It contains 160 characters.
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