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Stock Valuation

Problem 1: Microtech Corporation is expanding rapidly, and it currently needs to retain all of its earnings, hence it does not pay any dividends, with the first dividend of $1.00 coming 4 years from today. The dividend should grow rapidly-at a rate of 40 percent per year-during Years 5 and 6. Then the dividend should grow at a rate of 20 percent per year during Year 7. After Year 7, the company should grow at a constant rate of 4 percent per year. If the required return on the stock is 20 percent, what is the value of the stock today?

Reference no: EM132739471

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