Microtech corporation is expanding rapidly and currently


Nonconstant growth

Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 31% per year - during Years 4 and 5; but after Year 5, growth should be a constant 5% per year. If the required return on Microtech is 16%, what is the value of the stock today? Round your answer to the nearest cent.

ANSWER AND EXPLAIN FULLY

Request for Solution File

Ask an Expert for Answer!!
Financial Management: Microtech corporation is expanding rapidly and currently
Reference No:- TGS01228712

Expected delivery within 24 Hours