What is the value per share of firm stock

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Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% and its dividend yield is 7%. (Note: Assuming the stock is in equilibrium, the required return equals the expected return, which is the sum of dividend yield and the constant growth rate of dividend). Your company is about as risky as the average firm in the industry, but it has just successfully complete some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 50% this year and 25% the following year, after which growth should match the 6% industry average rate. The last dividend paid (Do) was $1. What is the value per share of your firm stock?

Reference no: EM132459359

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