Determine the maximum price per share

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Lala Corporation is entering into expansion project that may limit the earnings during the expansionary period. However, after the completion of the project in five year-time, it should allow the company to enjoy much improved growth in earnings and dividends. Last year the company paid a dividend of RM2.80 per share. It expects 3 percent growth in the next ?ve years. In year six and seven, 6 percent growth is expected. In year eight and thereafter, growth should be constant at 12 percent per year.

Determine the maximum price per share that an investor who requires a return of W percent should pay for Lala Corporation common stock.

Reference no: EM133111052

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