Draw the time line showing the dividends per share of stock

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Reference no: EM13806666

The Amazing Video Co. has just paid an annual dividend of 40 cents. You forecast that for the next five years dividends will grow at the rate of 25% a year over the period. From year five on, you expect the growth rate to fall to the industry average of 8% and to remain at this level forever after.

a) Draw the time line showing the dividends per share of this stock for years 1 through 6.

b) If the expected rate of return for this stock is 15%, calculate its price.

Reference no: EM13806666

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