The dividend should grow rapidly - at a rate of 50 per year, Ask an Expert

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Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings, hence it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1 coming 3 years from today. The dividend should grow rapidly - at a rate of 50% per year - during years 4 and 5, but after year 5, growth should be constant at 8% per year. If the required return on Microtech is 15%, what is the value of its stock today?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9415230

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