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Charlie’s Computer Corporation (CCC) is growing rapidly and expects to continue to grow at 20% per...

Charlie’s Computer Corporation (CCC) is growing rapidly and expects to continue to grow at 20% per year for the next two years, 10% for the year after and then stabilize to 6% annual growth. CCC doesn’t currently pay dividends but expects to pay a $2 per share dividend one year from today. If the appropriate discount rate is 12%, then what is the value of a share of CCC stock?

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Answer #1

Year 1 Cash flows $2.00 $2.40 $2.64 $46.64 pv @ 12% 0.89286 0.79719 0.71178 0.71178 Present value $1.79 $1.91 $1.88 $33.20 $3

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