Problem:
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next ten years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $14.75 per share 11 years from today and will increase the dividend by 5.25 percent per year thereafter.
Required:
Question: If the required return on this stock is 13.25 percent, what is the current share price?
Note: Show supporting computations in good form.