The Howling Dog Day Care Corp. (HDDC) just paid a dividend of $1.25 per share. The dividend is expected to grow at 30 percent for the next five years and then level off to a 5 percent growth rate indefinitely. The required rate of return on the company's stock is 12 percent.
a. Draw a timeline of the expected cash flows to a shareholder assuming they plan to hold the stock for five years.
b. How much is a share of HDCC worth in five years (i.e. after the next five dividend payment
c. What is the current share price of HDDC?