Period of depressed earnings performance

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Reference no: EM13918426

Excel Corporation has recently witnessed a period of depressed earnings performance. As a result, cash dividend payments have been suspended. Investors do not anticipate a resumption of dividends until 2 years from today, when a yearly dividend of $0.25 will be paid. That yearly dividend is expected to be increased to $0.75 in the following year and $1.50 in the year after that. Beyond the time when the $1.50 dividend is paid, investors expect Excel’s dividend to grow at an annual rate of 5 percent into perpetuity. All dividends are assumed to be paid at the end of each year. If you require an 18 percent rate of return on Excel’s stock, what is the value of one share of this stock to you today?

Reference no: EM13918426

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