Question

Swink Electric, Inc., has just developed a solar panel capable of generating

200 percent more electricity than any solar panel currently on the market. As a

result, Swink is expected to experience a 15 percent annual growth rate for the

next five years. When the five-year period ends, other firms will have developed

comparable technology, and Swink’s growth rate will slow to 5 percent per year

indefinitely. Stockholders require a return of 12 percent on Swink’s stock.

The firm’s most recent annual dividend (D0), which was paid yesterday, was

$1.75 per share.

2.c. (6 points)	Calculate stock price today, P0.
P0=		<==== stock price today is the sum of present values of expected dividends and the terminal price.

Answer 1

The answer for above problem is explained below.