How about the end of the fifth year

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Warf Co. just paid a divident of $4 per share. The company will increase its dividend by 20% next year and then reduce its dividend growth rate by 5 percentage points each year until it reaches the industry average of 5% (i.e. 20%, 15%, 10%, and then 5%), after which the company will keep a constant growth rate, forever.

If the required return on the Warf stock is 13%, what will a share of stock sell for today? How about the end of the fifth year?

Reference no: EM132052656

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