Top Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same growth rate is expected to last for another 2 years. The company has just paid a dividend of $1.60 and the cost of equity is 10% and the normal growth rate after 2 years is equal to 6%.
Required:
a. Calculate the expected dividends for the coming 3 years.
b. What is the share price now? What is the share price one year later if the cost of equity remains at 10%?
c. What is the expected dividend yield and capital gains yield now?
d. What will be TTC‘s dividend yield and capital gains yield once its period of supernormal growth ends?
e. Now assume that TTC's period of supernormal growth is to last anther 5 years rather than 2 years. How would this affect its price, dividend yield, and capital gains yield? Answer in words only.