Question

a. garal Technologies was founded so years ago. It has boen proftable forthe last 5 years but it has neoded all of ts carmnings to support gromth and thus has neve paid 12. a dividend. Management has indicated that it plans to pay a so.as dividend s years from today,then to inerease it at a relatively rapid rate for a years, and then to increase it at a constant rate of 800% thereafter. Management's forecast the future dividend stream, along with the forecasted growth rates, is shown below. a required return of i1.00%, what is your estimate of the stock's current value? 13. O o 15. Year NA $0.000 $0.000 $0.000 s0.250 so.325 S0 374$0.404 NA NA 30.00% 15.00% 16. O | 17. o 102.510.75 18. Ob. $10.50 19. о : ОС,$8.60 d. $9.21 20.C O e. $9.29 02 8 6 5

Answer 1

Price of the share = $8.61 Price at end of 5 year = DIV 6/ke - C = 0.404/(0.11 - 0.08) = 0.404/0.03 = 13.47