Problem:
Assume that today is January 1, 2015 and that at t = 1 the company will pay the dividend 2.2. (That is, assume that this forecasted 2015 dividend is D1, and that this is the first cash flow you receive as an investor.) Assume that the dividend growth rate for the three years after 2015 (2016-2018, which correspond to Years 2, 3, and 4) is 15.5%. Assume that after 2018 (after Year 4), the dividend grows at a long-run constant growth rate of 5.0% a year. The required rate was 8.4%
Required:
Question 1: Given these assumptions, what is your estimate of the stock's intrinsic value? Please provide step by step solution.