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Microtech Corporation is expanding rapidly, and it currently needs to retain all of its earnings; hence it does not pay any dividends. However, investors expect Microtech to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly-at a rate of 50 percent per year-during Years 4 and 5.

After Year 5, the company should grow at a constant rate of 8 percent per year. If the required return on the stock is 15 percent, what is the value of the stock today?

Business Management, Management Studies

  • Category:- Business Management
  • Reference No.:- M92185697

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