Problem:
The earnings and dividends of a firm are expected to grow at an annual rate of 15 percent over the next 4 years and then slow to a constant growth rate of 8 percent per year thereafter. The firm currently pays a dividend of $0.50 per share (D0 = $0.50).
Required:
Question: What is the value of this firm's stock to an investor who requires a 14 percent rate of return?
Note: Explain in detail and show all computations in proper way.