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 to expect that its earnings and dividends will grow at a rate of 40% this year and 25% the following year, after which growth should match the 5% industry average rate. The last dividend paid was $2. What is the value per share of your firm's stock?
A) $42.60
B) $82.85
C) $91.88
D) $101.15
E) $110.37
B
Business
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