Test Sales, Inc. (TSI) just paid a common stock dividend of $2.50 per share. Its sales are expected to grow at a rate of 20% for the years 1 to 3, at 16% for years 4 and 5, and at 6% per year indefinitely thereafter. Dividend growth is expected to match sales growth. The required rate of return for this stock is 14%.
What will be the market value of the stock at the end of five years (P5)?
What is the current market value of the stock (P0)?