What is your estimate of the stock current value

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Reference no: EM131968463

Agarwal Technologies was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay a $0.25 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter. Management's forecast of the future dividend stream, along with the forecasted growth rates, is shown below. Assuming a required return of 11.00%, what is your estimate of the stock's current value?

Year: 0 1 2 3 4 5 6

Growth rate: NA NA NA NA 30.00% 15.00% 8.00%

Dividends: $0.000 $0.000 $0.000 $0.250 $0.325 $0.374 $0.404 ?

Question options: $8.60 $9.29 $10.50 $9.21 $10.75

Reference no: EM131968463

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