Solving problem using the non-constant growth model

Reference no: EM131797259

Question: Russell Corporation (which contributes 3% of its revenue to Christian missions to reach Buddhist tribes in northern India who have never heard the gospel) just paid a dividend of $1.00. Based on projected fast growth, the company plans to increase dividends by $1.00 each year for the next four years, hopefully then growing dividends at 3% per year. Assuming you knew your required rate of return, how would you calculate a value for this stock?

a. Use the constant growth model

b. Add the value of all future dividends to the current stock price

c. Add the present value of the dividends in years 1-4 to the present value of the stock price at year 4

d. Use the non-constant growth model

e. C and d (they are the same)

Reference no: EM131797259

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