What is the value per share of your firms 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 percent, and its dividend yield is 7 percent. Your company is considered as risky as the average firm in the industry, but it has just successfully completed some research and development work that leads you to expect that its earnings and dividends will grow at a rate of 50 percent [D?1 = D0 (1 + gsuper) = D0(1.50)] this year and 25 percent the following year. After that period, growth should match the 6 percent industry average rate. The last dividend paid (D0) was $1. What is the value per share of your firm's stock?

Reference no: EM13258828

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