Problem:
Due to ongoing capital investments, Lounge Lizards, Inc. doesn't currently pay any dividends. However, four years from now, the firm will pay a $2.50 dividend, and its dividend payment will then increase each year by 5% until perpetuity.
Required:
Question: If you use a discount rate of 10%, calculate the maximum you would want to pay for the firm's stock today.
Note: Please provide reasons to support your answer.