Nonconstant growth, NONCONSTANT GROWTH Computech

Nonconstant growth

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Reference no: EM132018918

NONCONSTANT GROWTH Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from today. The dividend should grow rapidly-at a rate of 38% per year-during Years 4 and 5; but after Year 5, growth should be a constant 5% per year. If the required return on Computech is 17%, what is the value of the stock today? Round your answer to the nearest cent. Do not round your intermediate calculations.

Reference no: EM132018918

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