Reference no: EM132665788

Prescott Pharmaceuticals will pay an annual dividend of $ $0.54 one year from now at t=1. Analysts expect this dividend to grow at 19.5% per year thereafter until the end of year 24. Dividends are then expected to be stable until t=32

Afterwards, dividends decline at a rate of 3.2% annually (the dividend at t=33 is 3.2% smaller than the payment at t=32) and are paid in perpetuity.

Problem 1: According to the dividend-discount model, what is the value of a Prescott Pharmaceuticals share if the firm's equity cost of capital is 12.3%? (Round to the nearest cent).