The dividend paid in Year 3 is = $1.25
The dividend paid in year 4 is = $1.6875
The dividend paid in Year 5 is = $2.2781
The dividend paid in Year 6 = $2.4148
P5 = D6/ Re - g
= $2.4148/ 0.13 - 0.06
= $34.4969
So, the value of the stock today is :
= $1.25/ 1.13^3 + $1.6875/1.13^4 +( $2.2781+ $34.4969)/1.13^5
= $0.8663 + $1.035 + $19.96
= $21.8613
= $21.86 ( rounded off to two decimal places)
Nonconstant growth Computech Corporation is expanding rapidly and currently needs to retain all of its earnings;...
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 $1.25 coming 3 years from today. The dividend should grow rapidly-at a rate of 35% per year-during Years 4 and 5; but after Year 5, growth should be a constant 9% per year. If the required return on Computech is 15%, what is the value...
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 48% per year - during Years 4 and 5; but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 13%,...
Problem 9-14 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 $2.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 29% per year - during Years 4 and 5; but after Year 5, growth should be a constant 10% per year. If the required return on Computech...
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 $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 15% 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 15%, what is...
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 $1.25 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 a constant 4% per year. If the required return on Computech is 16%, what is...
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 $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 32% per year - during Years 4 and 5; but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 17%, what is...
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 $1.00 coming 3 years from today. The dividend should grow rapidly - at a rate of 19% 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 15%, what is...
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 $1.25 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 9% per year. If the required return on Computech is 13%, what is...
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 $1.50 coming 3 years from today. The dividend should grow rapidly - at a rate of 28% per year - during Years 4 and 5, but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 12%, what is...
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 $1.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 41% per year - during Years 4 and 5, but after Year 5, growth should be a constant 4% per year. If the required return on Computech is 15%, what is...