Get Rich Quick, a funds management company, is considering an investment in a new pharmaceutical company. The company will be unable to pay a dividend until the end of Year 6. If a new product is successfully developed for sale at that time, then the dividends will be significant. The Year 6 dividend will be $8.00, the Year 7 dividend will be $10.00 and dividends will grow by 8 per cent thereafter. If the required rate of return is 18%, what is the maximum price Get Rich Quick should pay?
- $38.59
- $100.00
- $40.75
- $58.75
- $40.01