Nonconstant growthcomputech corporation is expanding, Ask an Expert

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NONCONSTANT GROWTH

Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly-at a rate of 30% per year-during Years 4 and 5; but after Year 5, growth should be a constant 5% per year. If the required return on Computech is 12%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations.

$____

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Financial Management, Finance

Category:- Financial Management
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