Problem:
Sugar Land Co. is a fast growing firm and no dividend will be paid on the stock over the next 9 years. The company then will pay a $12 dividend per share in year 10 and will increase the dividend by 5 percent forever.
Required:
Question 1: If the required rate of return for this stock is 13 %, what should be the intrinsic value of Sugar Land Co.?
Note: Provide support for your rationale.