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Compute how much is the stock worth today

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Reference no: EM132721214

Problem 1: Sales and profits of Growth Inc. are expected to grow at a rate of 25% per year for the next six years but the company will pay no dividends and reinvest all earnings. After that, the dividends will grow at a constant annual rate of 7%. At the end of year 7, the company plans to pay its first dividend of $4.00 per share. If the required return is 16%, how much is the stock worth today?

A. $25.08
B. $20.52
C. $22.80
D. $13.68
E. $18.24
F. $15.96

Reference no: EM132721214

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