Firm needs to plow back its earnings to fuel growth

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Reference no: EM13913460

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next seven years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a $12.35 per share dividend in year 10 and will increase the dividend by 5.50 percent per year thereafter. Required: If the required return on this stock is 12.50 percent, what is the current share price?

Reference no: EM13913460

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