Problem:
A firm just paid a dividend of $2.50. Suppose that the firm's dividend is expected to grow at a rate of 18%/ year for the next 3 years. After that, dividend growth is expected to go to 3% per year and remain at that level. If Firm X's required return on equity is 11%,
Task:
Question: Estimate the intrinsic value of the firm's common sharestoday based on the two-stage growth model.
Note: Please explain comprehensively and give step by step solution.