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Firms investors expect to earn a return

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Reference no: EM13212294

Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $1 per share dividend to be paid a year from now, the first dividend since the crisis.

Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $3 per share) dividend growth is expected to settle down to a more moderate long-term growth rate of 6%. If the firm's investors expect to earn a return of 14% on this stock, what must be its price?

Reference no: EM13212294

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