Stephenson Technologies (ST) produces the world's greatest single-lens- refl ex (SLR) camera. The camera has been a favorite of professional photographers and serious amateurs for several years.
Unfortunately, the camera uses old fi lm technology and does not take digital pictures. Ron Stephenson, owner and chief executive officer of the company, decided to let the business continue for as long as it can without making any new research-and-development investments to develop digital cameras.
Accordingly, investors expect ST common stock to pay a $4 dividend next year and shrink by 10 percent per year indefinitely. What is the market price of ST stock if investors require a 12 percent return?