The required return equal to the expected return

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Reference no: EM131989943

Simpkins Corporation does not pay any dividends because it is expanding rapidly an ds to retain all of its earnings. However, investors expect Simpkins to begin p dividends, with the first dividend of $0.50 coming 3 years from today. The dividend should grow rapidly-at a rate of 80% per year-during Years 4 and 5, After Year 5, the company should grow at a constant rate of 7% per year. If the required return on the stock is 16%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)?

Reference no: EM131989943

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