Problem:

Assume that the average firm in your company's industry is expected to grow at a constant rat of 5.8% and its dividend yield is 8.4%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 44% this year and 25% the following year, after which growth should match the 5.8% industry average rate. The last dividend paid (D0) was $1.1.

Required:

Question 1: What is the value per share of your firm's stock?

Note: Be sure to show how you arrived at your answer.