Problem:
Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividend of $4 per share and has announced that it will increase the dividend by $5 per share for each of the next four years, and then never pay another dividend.
Required:
Question: If you require a return of 12 percent on the company's stock, how much will you pay for a share today?
Note: Be sure to show how you arrived at your answer.