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Assume that the average firm in your company’s industry is expected to grow at a constant rate of 5%, and its dividend yield is 4%. 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% (D1 = D0(1.40)) this year and 25% the following year after which growth should match the 5% industry average rate. The last dividend paid (D0) was $2. What is the stock’s value per share?

A. $ 42.60

B. $ 82.85

C. $ 91.88

D. $101.15

E. $110.37

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92346963

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