Percent rate of return to purchase vaxxon common stock

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For the past 30 years, Vaxxon Manufacturing has paid a dividend equal to $2.20 per share. In four years, senior management expects the company to begin growing at a constant rate and continue this growth pattern for the remainder of its life. As a result, Vaxxon plans to continue paying a $2.20 dividend for the next three years. Then, beginning four years from now (i.e., in Year 4), the dividend will be increased by 4 percent and this growth will continue every year thereafter. If investors require a 17 percent rate of return to purchase Vaxxon's common stock, what should be the market value of its stock today?

Reference no: EM133071888

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