Consider the situation for Hampton Inc., a company that was set up in 2016 to produce and market a new high-tech fishing lure. Hampton’s sales are currently growing at a rate of 50% per year. The company expects to experience a high but declining rate of growth in sales and earnings during the next 8 years, after which analysts estimate that it will grow at a steady 10% per year. The firm’s management has announced that it will pay no dividends for next 4 years (2018 to 2021) but that if earnings materialize as forecasted, it will pay a dividend of $1.40 per share at the end of Year 5 (in 2022), $1.60 in Year 6, $1.80 in Year 7 and $2.20 in Year 8. After Year 8, current plans are to increase dividends by 4.34% per year. Hampton’s investment bankers estimate the cost of equity to be 6.42% on similar stocks.
What is the Hampton’s stock current price in 2018 based on the dividend discount model?