Question

Question 2: Xueba Inc. is a new startup company offering an interactive learning app to help students in high school with their studies. Ever since Xueba founded a few years ago, it has been experiencing rapid growth. Xueba just paid a dividend of $2.95 per share. You expect that annual dividends will grow by 25% each year for the next four years, by 15% for the following two years, and then fall to a sustainable growth rate of 4% forever. If the required return is 11.26%, what is the current share price? (10 pts)

Answer 1

=2.95*(1.25/1.1126)+2.95*(1.25/1.1126)^2+2.95*(1.25/1.1126)^3+2.95*(1.25/1.1126)^4+2.95*(1.25/1.1126)^4*(1.15/1.1126)+2.95*(1.25/1.1126)^4*(1.15/1.1126)^2+2.95*(1.25/1.1126)^4*(1.15/1.1126)^2*1.04/(11.26%-4%)

=97.73258785