Calculate the expected share price one year from today

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Question - Aitkens Technologies Ltd (ATL), based in St. Elizabeth, has just patented a new technology which will give them a competitive advantage over their competitors. It is expected that their profitability will increase until their rivals respond with technological innovations of their own. The advantage is expected to last for three years resulting in the following growth estimates for profits and dividends: 20% in year 1, 17% in year 2 and 14% in year 3. Profits and dividends are expected to grow at a long-term rate of 7% after year 3. ATL's cost of capital is 18.7% and their most recent dividend was $5.10.

Required -

i) Calculate ATL's share price today (P0).

ii) Calculate the expected share price one year from today (P1).

Reference no: EM133038463

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