Expected to change annual cash dividend while new projects

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Let's say Novell is currently in a building stage. It's not expected to change its annual cash dividend while new projects are being developed over the next 3 years. Its dividend was $1 last year and is expected to be $1 for each of the next 3 years. After the projects have been developed, earnings are expected to grow at a high rate for 2 years as the sales resulting from the new projects are realized. The higher earnings are expected to result in a 40% increase in dividends for 2 years. After these two extraordinary increases in dividends, the dividend growth rate is expected to be 3% per year forever. If Novell's common stock required return is 12%, what is a share worth today?

Reference no: EM131521066

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