How much should nnt pay for share of black swan stock

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It’s early morning on January 1st, 2013 and NNT is thinking about investing in Black Swan Corporation stocks. Black Swan Corporation reported earnings per share (EPS) of $2 as of December 31, 2012 but paid no dividends. Earnings are expected to grow at 12% per year for the following 5 years. Black Swan Corporation will start paying dividends for the first time on December 31, 2017, distributing 54.55% of its earnings to shareholders. Earnings growth will slow down to 5% per year for the next 6 years (i.e. from January 1, 2018 through December 31, 2023). Starting on December 31, 2023 Black Swan Corporation will begin to pay out 75% of its earnings in dividends and earnings growth will stabilize at 2.5% per year forever. The required rate of return (RRR) on Black Swan Corporation stock is 10%. How much should NNT pay for a share of Black Swan stock?

Reference no: EM132002089

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