Problem:
Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 21 percent a year for the next 4 years and then decreasing the growth rate to 4 percent per year. The company just paid its annual dividend in the amount of $1.30 per share.
Required:
Question: What is the current value of one share of this stock if the required rate of return is 8.25 percent?
- $57.36
- $47.91
- $51.35
- $56.58
- $43.68
Note: Provide support for your underlying principle.