What is the capital gain rate that you will receive

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Question - Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate of dividend for the next four years. Beginning in year five, the growth rate of dividends is expected to drop to 7 percent per year and last indefinitely. If GRF just paid a $2.00 dividend and the appropriate discount rate is 15 percent, then what is the value of a share of GRF?

Suppose you plan on purchasing GRF stock in year three, right after the dividend is paid. You then plan on selling your stock at the end of year five, right after the dividend is paid. You expect GRF's stock price to be $53.00 at the end of year five. What is the capital gain rate that you will receive on your investment?

Reference no: EM132909405

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