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 about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 50 percent [D1 = D0(1 + g) D0(1.50)] this year and 25 percent the following year, after which 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?