Question: Fast Grow Corporation is expecting dividends to grow at a 20% rate for the next 2 years. The corporation just paid a $2 dividend and the next dividend will be paid 1 year from now. After 2 years of rapid growth dividends are expected to grow at a constant rate of 9% forever.
A) If the required return is 14%, what is the value of Fast Grow Corporation common stock today?
B) Assume the annual dividend grows at a constant rate of 9% indefinetly instead of the supernormal growth. How much is the stock worth if the dividends grow annually at 9%?