Suppose a company is experiencing the high-growth phase of


Suppose a company is experiencing the high-growth phase of the next four years, in which the company is not going to pay out any dividends. Instead, it invests into new projects that offer return on investment of 20%. After four years, the company is expected to enter a constant growth phase in which the company grows at a lower rate into the future. Based on the company’s recent annual report, the expected return on investment of this company is 10% and the planned dividend payout ratio is 50% in the constant growth phase. Suppose the company’s expected earnings are $2 per share in the next year, the discount rate for this stock is 15% based on its risk assessment, what should be the current stock price?

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Financial Management: Suppose a company is experiencing the high-growth phase of
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